Posted by: Tom Chappell | January 26, 2010

Employment Practices Liability Insurance

Over the past few years, many employers have become the focus of employee related lawsuits.  Some of these suits are the result of more rigid laws, enforcement agencies such as the Equal Employment Opportunity Commission (EEOC), predatory attorneys, and employees looking to strike it rich at the employer’s expense.  Many of these groundless complaints get traction and appear credible because of the real life situations where the employees’ rights have, in fact, been violated.

Whether groundless or real, the employer must pay for legal defense and, if found guilty, pay stiff judgments and penalties.  We now find ourselves in a business environment so fraught with the threat of lawsuit that the insurance industry has developed a series of insurance products that every prudent business owner must review.

Just to drive home my point, the following statistics are certainly worth a quick read.

Facts according to the EEOC:

  • Over the past ten years, an average of more than 79,000 employment practice liability (EPL) charges have been filed annually, resulting in more than $2.2 billion in benefits for complaints.
  • Monetary awards increased 73% from 1996 to 2004, when the total amount awarded topped $250 million.
  • Jury Verdict Research reports that the median verdict in EPL cases hit $218,000 in 2004, up from $133,000.

Is insurance available to protect businesses from the threat of an EPL suit?  Yes, there are several that have become recognized as standards in the industry.  The liability policy series that we have selected as our “flagship” group of products is written by Chubb.  The Chubb Insurance Company is known as an innovator in the development of specialty liability insurance products.

Chubb created “The ForeFront Portfolio”.  This portfolio approach allows the insured to combine a variety of related coverages tailored to meet specific needs.   Employment practices liability insurance (EPLI) offers protection against employment related exposures, including harassment, discrimination, wrongful termination, retaliation, and more.  Chubb can combine the EPLI package with directors and officers liability insurance (D&O) or fiduciary liability insurance.  In short, the Chubb portfolio approach can be customized to meet your needs and at a very affordable price.

Is your company too small to be threatened by EPL suits?  Absolutely not.  In fact, businesses both large and small are seeing increased activity in this area.  And, don’t expect your general liability (GL) policy to help.  A GL policy plainly excludes both employment claims as well as directors and officers claims.

I believe, employment practices liability insurance and directors and officers liability insurance are two of the most important coverages any business could purchase.  Do we carry this insurance at Chappell, Smith & Associates, Inc?  You bet we do.  I my opinion, EPLI may be as important as our general liability insurance.

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