Expose’d is the name of a company. It’s not their real name. It is, however, an accurate description of their employment practices liability.
As with many companies, coverages suggested by their agent that Expose’d was unfamiliar with were quickly declined. Maybe there is an inherent distrust for any salesperson suggesting a product or service for the first time. Perhaps it is the fact that Expose’d doesn’t have the coverage, doesn’t feel like they need the coverage, or cannot see the value in paying the additional premium.
Now, I’m sure you are asking, “What is employment practices liability insurance (EPLI)?” EPLI provides protection for an employer against claims primarily made by employees, former employees or potential employees. It covers discrimination, wrongful termination of employment, sexual harassment and other employment-related allegations. It also provides coverage for the cost associated with defending these types of claims and the awarded damages.
Hopefully, it is becoming a little clearer, but you may be wondering: what does it mean to you?
Employment liability lawsuits are on the rise. According to a leading provider of EPLI coverage, these types of lawsuits constitute the most common type of liability lawsuit today.
Every employer must face the reality that they may be the target of legal action from past, present and prospective employees. Even if the claim is groundless or fraudulent, the cost to defend a suit can be very high—not only because of the monetary expenses involved—but also due to the drain on time and other company resources. For example, the legal fees can be more than $300 per hour because employment practices suits are tried in federal court and often require legal representation by an attorney with experience in the federal court system. Your business might suffer because you are not there, morale can decrease and, as a result, production can dwindle. See Could This Happen to You? sidebar, which lists potential scenarios for employment-related claims.
Without EPLI coverage, the awards, settlements and legal fees exemplified in the “Could This Happen To You?” sidebar would be the responsibility of the defendant company. Data collected for 2003 by Jury Verdict Research of Horsham, PA, shows a compensatory median of $250,000 for all EPLI-related verdicts and $65,000 as a median settlement. Consider the serious financial impact one of these claims could have on your company’s bottom line. The defense costs alone can be staggering.
Having the right EPLI policy can spare you the worry of selecting qualified legal assistance, paying defense costs, including a generous settlement provision, and providing coverage for punitive or exemplary damages.
EPLI Coverage and Loss Prevention Techniques
EPLI coverage is usually excluded in a basic property and liability business insurance policy and must be purchased separately.
As coverages may vary by the company and policy offered, you should work closely with your agent to find the one that best suits your needs. Some policies will provide coverage that dates back to the very first day a business began, while others provide coverage from the policy inception date. Some may cover all compensatory damages whereas others won’t cover punitive damages. It is your agent’s responsibility to know what is covered and offer the broadest coverage available at an affordable price.
If you are anything like Expose’d, you may be thinking, “This doesn’t apply to me because it will never happen. We are like a family here. None of my employees would ever be that unhappy.” Think again.
Spurred by federal legislation and monetary awards, employ-ment-related claims are steadily rising, with no end in sight. Any company that has employees should have EPLI coverage—period! In fact, EPLI has become a necessary cost of doing business in today’s litigious society. It ensures your protection if you become a target of one of these types of lawsuits.
Not only is your coverage essential, it also is necessary to be proactive and limit your exposure. As with any comprehensive risk management program, incorporating a loss prevention program is highly recommended. There are many techniques you can integrate into your business practices to minimize your exposure. For example, establish or update the follow-ing: hiring processes, employee and applicant testing, the prohibition of workplace harassment, personnel policies and employee handbooks, employee evaluations, discipline and corrective action plans, and terminating employment policies. Many insurance carriers provide online training, documents and handbooks along with your coverage at no additional charge.
End at the Beginning
Expose’d, with the help of their agent (see How to Choose Your Agent sidebar) and a review of many lawsuit statistics, ultimately came to the conclusion that EPLI coverage was in their best interest. They realized that just one lawsuit decided in an employee’s favor could seriously jeopardize the future of the company.
Expose’d would still like to think it will never happen to them and their “like-family” business will never have to face
an employment practice suit. However, they aren’t so naïve as to think that in today’s litigious climate, a company—especially a small or medium-size company—can afford to be unprotected.
With that change of mind came a change to their name: Expose’d became Covere’d.
Could This Happen To You?
The following are based on claim scenarios from St. Paul Travelers Bond.1
1This material does not amend, or otherwise affect, the provisions or coverages of any insurance policy or bond issued by St. Paul Travelers. It is not a representation that coverage does or does not exist for any particular claim or loss under any such policy or bond. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy or bond provisions, and any applicable law. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations. Includes copyrightable material of The St. Paul Travelers Companies, Inc. with permission. Travelers Casualty and Surety Company of America and its property casualty affiliates, Hartford, CT 06183.
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