The importance of Employment Practice Liability Insurance
Kevin Bromley
Commercial Lines Manager @ Integrated Insurance Solutions | North Carolina Office
In this month’s edition of Integrated Monthly, I wanted to take a moment to provide professional insight on a line of coverage most business owners often overlook.
As you may recall, a few months ago we talked about the importance of cyber insurance and the necessity to have it in place to adequately protect your business. Along with cyber incidents, Employment Practice Liability (EPL) is one of the top claims experienced by business owners.
Even if you are an experienced business owner, if you do not know exactly what EPL coverage is, I can put your mind at ease and assure you that you aren’t the only one in this boat.
Simply, Employment practices liability insurance helps cover defense and damage costs resulting from a variety of employment-related claims. These could include allegations of wrongful termination, discrimination, workplace harassment or retaliation. * We will dive into the common claim trends in the marketplace a little bit later on.
Unfortunately, in today’s society, not only are the number of lawsuits for these claims are on the rise, so are the cost associated with defending these claims. This is not necessarily a reflection of poor business practice, but often times a quick way for a disgruntled employee to retaliate against a former employer. Even if the claims are outrageous and frivolous, EPL coverage and defense cost are often covered by EPL insurance coverage (check with your carrier and/or agent to see what your policy covers).
In 2018 alone, the Equal Employment Opportunity Commission (EEOC) handled $90,558 discrimination cases and recovered over $505 million in damages. *
While this coverage may be included in a Business Owner’s Policy or a Commercial Package, reviewing the coverage limits with your carrier/agent is always strongly advised. Often times built in package coverage only offers minimal limits.
If you have any employees, it is strongly advised to explore a standalone EPL policy or increase the limits of coverage within your package. General rule of thumb, as was the case with cyber insurance, if you have the basic built in coverage, you don’t actually have coverage. Speaking with your agent and attorney is a surefire way to determine the appropriate limits of coverage to carry.
Now that the groundwork is laid for understanding the coverage, you may be asking yourself, I only have a small number of employees, do I actually need this coverage? As aforementioned, my advice is that if you have ANY employees, you are exposed to these types of claims and the coverage is about as required as a non-required coverage can be. It only takes one employee, and one instance to occur, to file a claim that could end up being extremely costly for you and your business.
According to AmTrust Insurance, the top 5 EPL claim trends stem from the following:
1) Retaliation Claims
More than half of all EEOC claims were claims filed related to retaliation.
2) Sexual harassment claims
With the #metoo movement being front and center, sexual harassment claims accounted for 31.7% of EEOC claims.
3) Wage and Hour Litigation.
The current "Gig-Economy" is a leading driver of the increase of these types of claims. With employees choosing to freelance, or sub-contract services to businesses, it is critical to stay up to date with all state and federal laws pertaining to employee classification.
4) Gender Pay Gap
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As with the case with sexual harassment claims, gender pay disparity is front and center in today's world.
5) Constantly changing legislation on the legalization of Marijuana.
As of 2023, 47 of 50 states have legalized marijuana in some capacity.
In conclusion, as you can see, there are an extenuating number of circumstances that could arise exposing your business to an EPLI claim. Even businesses with iron clad internal procedures are falling victim to EPL claims. As always, working with a trusted insurance advisor such as Integrated Insurance Solutions, is a great way to review your business with a licensed insurance professional to reduce the risk of being under insured and making sure the insurance coverages in place meet your satisfaction.
Insight provided by,
Kevin Bromley
Business Development Manager/CL Producer
Integrated Insurance Solutions
Charlotte, NC Office
585.406.7404
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