When thinking about employment-related lawsuits, employers should be thinking when – not if. Employment claims can be filed against big corporations and small businesses alike. Defense costs against a lawsuit or EEOC claim can get expensive quickly. Sometimes an employer must decide between settling a discrimination claim and pursuing a viable defense purely based on finances. However, an employer who has Employment Practices Liability Insurance is better prepared to protect themselves and defend a claim.
EPL Insurance, or EPLI, provides coverage to employers against claims made by employees alleging discrimination (which can be based on sex, race, age, or disability), wrongful termination, harassment and various other employment related issues.
EPLI costs for an employer can depend on a variety of factors, such as the size of the company, where it is located, what the business does, how many employees it has, the number of claims or lawsuits previously filed and how long the company has existed. Coverage can include defense and damages costs.
EPLI can be split into two types of coverage: claims-made or occurrence. Claims-made requires the policy to be active when the incident occurred and when the claim is filed. Sometimes, claims-made policies have retroactive dates. Claims-made is the most common type. Occurrence based policies provides coverage if the event happened while the policy was in place, regardless of when the claim was filed.
Often policies cover directors and officers, management personnel, and employees as insureds. The most common exclusions are for bodily injury, property damage and intentional or dishonest acts. EPLI is available as a stand-alone coverage. It is also frequently sold as part of a management liability package policy.
Statistically speaking, in 2015, Hiscox Insurance, reported that the average cost of employment related claims was $125,000 for defense costs and settlement payments. The average self-insured deductible was $35,000. For employers without EPLI, they were out of pocket an extra $90,000.
Employment related claims and lawsuits can happen to any employer. Employers should take preventative steps to protect their businesses by asking their insurance agents and companies about EPLI. If you have any questions about EPLI before calling your agent, we here at Joseph, Hollander & Craft are happy to assist in any way we can.