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EPLI: Protecting Your Business |
Monday, 22 February 2010
Employment Practices Liability (EPLI) is a crucial insurance for business owners. EPLI is often confused with Directors and Officers (D&O) and Errors and Omissions (E&O) insurances. EPLI differs in that it covers employers from claims made by workers who have sued the company for violating their legal rights as employees, such as:
- Claims for workplace or sexual harassment (Employer, another employee, or a third-party)
- Breach of employment contract
- Wrongful termination
- Discrimination
- Invasion of privacy
- Retaliation (i.e. an employee files a complaint about workplace conditions and is subsequently fired)
- Failure to promote, and even failure to hire (by a new job applicant)
EPLI coverage pays for settlements and defense costs during litigation.
Why is EPLI so important? Employment practices claims are the largest growing claims in all of the business insurance area.
- In 2008, there were 95,000 charges reported to the Equal Employment Opportunity Commission (EEOC).
- Claims in 2007 and 2008 have reached as high as $19 Million for one suit.
- The average verdict in 2008 was $887,478.
- Courts have no protective caps on these lawsuits and tend to side with the employee in these cases.
- Even in the event of frivolous accusations, it could cost up to $100,000 just to defend a case.
Common Misconceptions“My business owner’s policy covers this currently”
- Most policies cover only $5,000, which is likely not enough for a deposit on legal services.
“Small businesses don’t have this exposure”
- Small businesses tend to be more close-knit, and when things go wrong, it tends to be more personal.
- Some small companies may not have sufficient controls and procedures in place, and are therefore more susceptible to accusations.
“We never have employee turnover”
- Claims can be made for lack of promotion, harassment or invasion of privacy. Claims can also be made by job applicants.
In addition to EPLI, there are other steps that an employer can take to minimize the company’s exposure to lawsuits through implementation of some basic measures:
- Establish zero-tolerance policies toward workplace harassment, discrimination, and alcohol/substance abuse.
- Develop a comprehensive Employee Handbook which clearly defines the company policies and procedures.
- Conduct regular performance appraisals.
- Ensure that employee files are complete with all necessary documentation.
Written by Tracy Martin, CEO of Martin Financial Group in Princeton, NJ. MFG, a leading insurance broker and general agent, provides personalized broker and claims support and is a top resource for Business and Commercial Insurance and Financial Services. For more information on this subject or about the various insurance options for businesses and individuals, contact Martin Financial Group at 609-356-1500 or visit www.immartin.com.
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