One of the most important but often overlooked forms of business insurance is Employment Practices Liability coverage. Designed to respond if your business is accused of wrongdoing by an employee, EPLI coverage is a standard part of most larger corporations’ coverage, but for small businesses, it’s often not included for a variety of reasons – sometimes just because the broker or carrier doesn’t recommend it.
But in a world where lawsuits run rampant against small businesses, with more than half of all employee-filed claims being filed against small businesses, it’s important to evaluate whether EPLI coverage is a good fit for you.
ACCUSATIONS CAN COME AT ANY TIME
The clear majority of people you interact with, whether in a one-time job interview or someone you hire are good people who want to work hard and be part of your team. But that doesn’t stop an ever-growing number of lawsuits from job prospects, employees, and contractors for any number of things. Just how common are these suits? A Hiscox study in 2015 found that the average business has a 11.7% chance of an employee filed lawsuit charged against them.
And the cost of these lawsuits can be high. The average cost for a business of fewer than 500 employees was $125,000 including settlement costs, attorney fees and other related fees from the suit.
The moment you hire one employee, your company is exposed to many new forms of risk, but the most often overlooked is legal action by that employee. While nearly 70% of those lawsuits are eventually deemed to be groundless, an attorney is needed to make that argument and EPLI coverage will ensure you are covered.
ACCUSATIONS COME FROM COMMON OCCURRENCES
You can be sued for just about anything – the cost comes in defending your business, regardless of who is in the right. This means you may be forced to pay thousands of dollars in defense for claims against:
- Wrongful termination
- Failure to promote/employ
- Negligent supervision
- Disputes related to wages
The laws protecting employees against these things are important and ensure a strong workforce, but can also backfire for small businesses that have either not done anything wrong, or made one small mistake. EPLI coverage can help.
WHAT EPLI COVERS
A good EPLI policy covers most situations that might arise like those listed above. More importantly, the insurance company is agreeing to defend your business if any action is brought against your business by someone who has worked for you or been considered for a role in your company.
This is extremely important because so many different claims are considered baseless but the cost of defending and ensuring the claim is thrown out can be substantial. Even more so if this is an issue you end up facing on a regular basis every year or two.
PROTECTING YOUR COMPANY
Good EPLI coverage can certainly help protect you against potentially unexpected lawsuits against your company by former or current employees. At the same, there are several things you can do that will create an environment less conducive to such suits.
Having a very clear policy in place for discrimination, sexual harassment, and employee interaction – including detailed training sessions for all members of staff (including management) can be extremely effective.
You should also consider expense reimbursement policies, paid time off that fits industry standards, and a clearly defined and regularly maintained employee review and increase system. These small (and relatively standard) systems can reduce the risk of possible issues, especially if policies are recorded, shared, and agreed to by employees.
If you’re interested in learning more about EPLI coverage and what it can offer your company, contact an expert from Radius Insurance. We can discuss with you the factors that influence your risk and what actions you can take to better protect your company.