Employment Practices Liability Insurance
From the moment that you start the pre-hiring process until the exit interview, you are vulnerable for a lawsuit. As a result, your business should take a hard look at whether it can afford to defend itself against alleged wrongful employment practices accusations. If not, there is an insurance solution called Employment Practices Liability that protects against wrongful termination, discrimination (age, sex, race, disability, etc.) or sexual harassment suits from your current, prospective or former employees. This coverage applies to directors, officers and employees, and can sometimes extend to third party liabilities.
Why Choose Employment Practices Liability Insurance?
According to researchers, three out of five employers will be sued by a prospective, current or former employee while they are in business. While many suits are groundless, defending against them is costly and time-consuming.
Employment Practices Liability Insurance provides protection as a standard form of business insurance from the following wrongful employment practices, including:
- Actual or alleged wrongful dismissal, discharge or termination
- Employment-related misrepresentation
- Employment-related libel, slander, humiliation, defamation or invasion of privacy
- Wrongful failure to employ or promote
- Wrongful deprivation of a career opportunity, wrongful demotion or negligent evaluation
- Wrongful discipline
- Vicarious liability for intentional acts
- Punitive damages
- Coercion or humiliation in relation to race, marital status, gender, age, physical and/or mental impairments, pregnancy, sexual orientation and any other protected class established by federal, state and local statutes
Many policies offer the following inclusions and add-ons:
- Consultation, HR assistance and other risk management consultative services.
- Coverage for defense costs outside the policy limits (for qualifying risks).
- Third party liability coverage (for qualifying risks).
- Wage and Hour Coverage for claims alleging wage and hour violations.
- Volunteer workers can be added as additional insureds.
- Extended reporting periods may be added.
Small Business EPLI
According to a recent study, more than half of all claims filed for employment-related liabilities are against employers with fewer than 50 employees. Alarmingly, the study also reveals that not even 2 percent of small businesses have Employment Practices Liability (EPL) coverage with their business insurance.
High Price Tag
Employment-related claims can be extremely costly, especially in cases that drag on for years. With a slow economy and increasing adoption of worker-friendly laws, these cases are on the rise – in fact, discrimination claims are reaching their peak, with a record 99,947 claims filed in 2011. Of these claims, 36 percent were based on racial discrimination, 30 percent on gender, 24 percent on age and 23 percent on disabilities. Many small businesses cannot afford to pay these costs and keep their company afloat with their current business insurance coverage.
An Affordable Solution
Fortunately, with employment-based lawsuits on the rise and the economy’s sluggish upward climb, EPL coverage is becoming more affordable. More insurers are beginning to offer EPL insurance policies with comprehensive coverage to smaller businesses to protect them in tough times. In fact, EPL insurance is becoming so important to the success of small businesses that it is being offered at more affordable prices and being tailored specifically for those smaller companies. With the average cost of an employment lawsuit exceeding $270,000, the potential return dwarfs the initial cost of EPL coverage.
This information is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. Should you have any questions or would like to discuss your company’s risk for EPLI insurance, please contact the insurance pros at ARCW Insurance. We are here to help.