Insurance Coverage You May Be Lacking: Employment Practices Liability Insurance
In discussing an overall insurance program with either clients or potential clients, whenever I present them with Employment Practices Liability Insurance coverage, the first reaction I get is a puzzled look on their face, like I’m trying to add to the insurance bill, which they already feel is too high. EPLI or Employment Practices Liability Insurance is professional liability insurance that covers certain employment related claims made by your employees. In talking with the client or prospect about this type of coverage, they often feel this is an unnecessary added expense, but, in reality, in today’s business environment, I believe this type of Scottsdale business coverage is a very important part of your overall insurance program. For those businesses that have employees, which are the vast majority, having Employment Practices Liability Insurance coverage is critical since your employees are interacting with the public or on site at other businesses.
Coverage of this type can also protect the company from potential meritless claims that could be filed against you by a disgruntled employee or employees. As businesses owners will tell you, they strive everyday to be fair and non-discriminatory towards their employees, but, on occasion, with certain habits that are hard to break and with the vast gender gap that is in the business world today, having EPLI coverage could be your last line of defense in case of a claim being filed against you. In most cases, Employment Practices Liability Insurance generally will cover such things as workplace harassment, workplace discrimination, wrongful discharge of an employee, and emotional distress. In discussing this type of coverage with clients and why it is needed, I usually use examples of what can happen to cause a claim or lawsuit. A claim could occur when one of your managers discriminates against an employee for various reasons, or it could be one of your employees out on a sales or service call who utters a certain remark that he or she shouldn’t have or sexually harasses your customer. The way the economy has been these past couple of years and with the outlook of more layoffs this coming year, the rate of lawsuits being filed by disgruntled employees against their companies has been rising, and it doesn’t look like it will slow down anytime soon. The type of business you are in, the number of full time employees in your company, your gross sales, and various risk factors including whether or not your company has been sued over employment practices in the past determines the cost of Employment Practices Liability Insurance. If your company has a record of no claims, this will assist you in getting the most competitive rate. Most EPLI policies will reimburse your company against the costs of defending lawsuits brought against your company in court and for judgments and settlements. The EPLI policy generally covers legal costs, whether or not your company wins or loses the suit. Please take note that EPLI policies usually do not pay for punitive damages or civil or criminal fines, and, additionally, other liabilities covered by other insurance policies, such as workers compensation, are excluded from EPLI policies. In a recent article I was reading about EPLI, the jest of the article dealt with a valuable and seemingly trusted employee raising what I thought was a justified concern, going through the proper channels, not once but three times, only to have upper management totally ignore her and her complaint. Now this was a major company, so it’s so hard to understand how this could have gotten to the point it did. The employee eventually had to quit for reasons of stress which caused a major worker’s comp claim and a lawsuit filed against the company. All this was set in motion because a company chose to ignore a problem instead of tackling it head on like one would expect in today’s business environment. One thing for sure in this outcome is legal fees will be high and their insurance costs will rise. As you can see, it is much easier to handle the problem once it is presented instead of ignoring it until it becomes a major claim and lawsuit.
No matter what the situation, your EPLI coverage should be your last line of defense. The most efficient way to help prevent employee lawsuits is to make sure your managers and employees are educated in EPLI so that you can minimize these problems before they become claims and possible lawsuits.
In designing a course of actions that should be undertaken, you should look at diversity and sensitivity training courses. Have your HR department create an effective hiring and screening program as to avoid any discrimination, and make sure all company policies are posted and they are included in each employee’s handbook. Having a written and detailed procedure on what steps are to be taken in case an employee feels they were an object of sexual harassment or discrimination by a supervisor is a very valuable tool to use in minimizing problems that could come up later and cause a claim or lawsuit to be filed. Also, this is very important, make you sure you document everything that occurs and what steps your company did to resolve this problem and what steps it took to hopefully prevent this from happening again.
If you would like to discuss how Scottsdale Employment Practices Liability Insurance can help your business, please give us a call or email us, and we will send you an information packet.