Most employers understand the value of insuring themselves against general liability and property claims, but statistically, businesses are more likely to face an employment practices liability insurance claim alleging wrongdoing by your company, your employees or you. Are you prepared if it should happen to you?
Claims made by employees — whether current, former or potential — can include wrongful termination, sexual harassment, discrimination based on age, sex, race and disability, and if you or someone in your company is accused, your company can be held liable.
“EPLI is an overlooked area of insurance, and most people don’t recognize the need until something happens,” says Paul Mattes, certified risk architect at The Sterling Insurance Group Inc. “If you have even one employee, you need this coverage to protect your business.”
A good, solid employee handbook is paramount because that is the first thing the courts will look at to determine whether you had explicit policies in place.
And while you may think that only your employees can sue you based on your employment practices, former employees can sue based on treatment — or perceived treatment — while they were employed, and those who have never worked for you can file suit if they believe they were discriminated against during the job application process.
“If there is an allegation of wrongdoing, you still have to defend yourself in court, and that defense is provided by the insurance,” Mattes says. “In the absence of a policy, if you have to go through six months of litigation in a wrongful termination suit and you are exonerated, you still have six months of attorneys fees to pay for.” EPLI policies are not one size fits all and can include add-ons such as coverage of prior acts and third-party coverage of acts by your employees at other locations.
“If you litigate and you lose, the settlement to a small business can be catastrophic,” Mattes says.