Protecting your business: Employment Practices Liability Insurance (EPLI)

 

Is your company likely to be sued by an employee?

It's unfortunate, but likely that at some point most employers will find themselves in a legal dispute with an employee. According to a recent USA Today article, more than 450 employment related lawsuits are filed in the United States against employers each day. In 2008, the Equal Employment Opportunity Commission received a record high total of 95,402 private sector discrimination charges against employers, up 15.2% from the previous fiscal year. Employers can expect even more employment related claims during an economic downturn. In fact, numerous studies have demonstrated that there is a significant increase in the number of employment related lawsuits filed when the economy goes into recession.

 

How much can an employment case cost your company?

The cost of just one employment lawsuit can be financially devastating for a company, even pushing some companies to the brink of ruination. One study determined that 63% percent of employment cases that went to trial in 2006 resulted in an average verdict of $600,000 for the employee. The National Federation of Independent Businesses estimates that companies typically spend in excess of $150,000 to defend these types of lawsuits. Could your company pay a $200,000 verdict in favor of a former employee? Could it survive a million dollar verdict?

 

Even if the employee didn’t win, could your company afford to spend $50,000-$100,000 to defend the claim? Under Ohio law, managers and supervisors are individually liable for harassment and discrimination, so is there a way to protect your personal assets from these potential liabilities?

 

Is EPLI the answer to the explosion in employment claims?

Many employers already have employment practices liability insurance (“EPLI”) or are looking at EPLI as a way to manage the risks of employment related claims. But is EPLI really the answer to the explosion of employment claims and associated costs? It certainly can be a part of the solution, along with other risk management practices like employee training and alternative dispute resolution programs, but only if you carefully select the right policy and the right carrier for your company.

 

Unlike other types of business insurance that tend to be fairly standardized, EPLI comes in many different sizes, shapes and forms. It is, therefore, imperative that employers carefully scrutinize and shop for the EPLI coverage that best fits their needs. Just a few of the basic questions an employer should ask when considering which EPLI policy to buy are:

 

• What’s covered - Does the definition of a covered claim include breach of contract, OSHA, wage and hour, and NLRB claims in addition to harassment and discrimination claims? Are claims arising out of a merger or reduction in force covered? What types of claims are specifically excluded from coverage?
  
  
• Who’s covered - Are affiliated and related entities considered an insured? Are all current and former employees covered?
  
  
• Who will represent you – Do you have the right to be represented by your own employment attorney who is familiar with your company, your employment practices and your business objectives? Or will the insurance carrier insist that you use an affiliated firm with which you have no relationship?
  
  
• Who decides whether to settle - Does the insurance company have full authority to settle claims or do you retain the right to approve a settlement? If you do, what happens if you withhold your consent to settle?

 

Is your company protected?

Is your company positioned to deal with the inevitable fallout from the explosion of employment claims? The time to buy EPLI or reevaluate whether or not the EPLI policy you already have adequately protects your company’s interests is not when a claim hits. Because by then, it will be too late.

 

millisor + nobil has considerable experience in dealing with EPLI carriers and issues. We’re pre-approved to represent employers for a number of EPLI carriers, including Travelers Casualty & Surety Company, Houston Casualty Company, Sentry Insurance, Professional Liability Insurance, Great American and U.S. Specialty Insurance.

 

Plus, we’ve also been successful in helping clients with other EPLI carriers such as AIG and Chubb obtain endorsement on their EPLI policies for us to handle their employment claims. We’d be happy to consult and help you select the EPLI carrier and policy that are right for you. And we’ll do it at no charge to you . . .