First in Protecting, Your HR Department.
Most business owners know the importance of carrying workers compensation insurance to protect themselves from claims for injury or damage by those they employ. However, more and more businesses have realized that workers comp doesn’t cover everything. In fact, the exceptions in this widely mandated employee benefit have prompted businesses and insurance companies to develop a companion product called employers liability insurance. In many areas, you can’t have workers compensation coverage without employers liability coverage, but in some states and countries, you need to purchase them separately.
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What Is Employment Practices Liability Insurance?
Employment practices liability insurance, commonly referred to as EPLI insurance, is specifically designed to protect employers from lawsuits brought on by employees. It provides coverage for many situations that general liability insurance does not.
Even lawsuits that are thrown out of court or are won by your company are expensive, due to the high cost of securing legal defense. Therefore, this insurance coverage is very important as financial protection for your business enterprise.
Not Having EPLI Insurance Can Cost Your Business
Lawsuits are not only expensive, they are also stressful. Resolution can take 18 to 24 months; a lawsuit will have an effect on your personal and business life for a long time. When it comes to expenses, the cost of a lawsuit can be daunting. According to the law firm of Murphy Austin Adams Schoenfield LLP, here are average court costs and legal fees when:
- Average court costs and legal fees when settled out of court: $10,000 to $50,000
- Average court costs and legal fees when the case is dismissed: $10,000 to $15,000
- Average court costs and legal fees when the case goes to trial: $150,000 to $200,000
The cost of EPLI insurance is a fraction of what you will pay if you end up on the losing side in a lawsuit. EPLI premiums will vary depending on a number of factors:
- The number of employees
- The amount of coverage purchased
- Whether your company has anti-discrimination and anti-harassment human resource policies policy in place
- Whether your company has had any EEOC complaints or lawsuits filed against it in the past
Employment Practices Lliability Insurance will easily pay for itself if you are sued even once. The best way to find out what EPLI will cost your company is to get a quote.
Why Your Business May Not Be Covered
Don’t be fooled, unless you have an EPLI policy, your business is not covered against employee lawsuits. According to an industry study, 6 out of 10 non-buyers of EPLI coverage mistakenly think they are protected under other polices.
According to industry experts, unpaid internships, illegal background checks, and issues related to pregnancy and health are the top trending employment practices litigation cases. The cost of claims is rising, as is the length of time it takes to resolve EPLI claims Advisen recently released a white paper that showed defense costs topping out around $300,000 and resolutions taking between 18 and 24 months.
Here is a quick look at the four most common types of claims:
1. Pregnancy Discrimination
2. Illegal Background Checks
3. Unpaid Interns
4. Genetic Discrimination
In today’s society many people sue first and ask questions later. Unfortunately, as an employer, there is a good chance that eventually one of your employees will sue your business.
Employee lawsuits can be much more than just an inconvenience. They are expensive, distractive for your management team, and can quickly erode productivity and employee morale. Employee lawsuits are becoming much more common, making employment practices liability insurance (EPLI) a necessity for businesses large and small.
Over the last 20 years, employee lawsuits have risen roughly 400%, with wrongful termination suits jumping up more than 260%. Oddly enough, you are more likely to be sued by an employee these days than to have a fire at your facility.
It’s not just large corporations that are being hit. Roughly 41.5% of employee lawsuits are brought against private companies with less than 100 employees. The financial damage of employee lawsuits can be dramatic; the cost of settling out of court averages $75,000, and the average jury award hits $217,000 if you go to court and lose.
It’s not just wrongful termination that can end in a lawsuit, you can be sued for many reasons. Despite all of these scary numbers, roughly 7 out of 10 businesses don’t carry EPLI insurance. This can be an expensive mistake.
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