By Paul Pukis Mosaic Insurance Alliance
Business continues as normal even though you let Susan go several weeks ago. All that changes when you flip through the mail and notice a letter from a local law firm. Hmm… You wonder if the local attorneys are dabbling in direct mail for new business. That’s not too far from the truth. The letter may not be a solicitation, per se, but a direct notice that Susan has sued you.
The U.S. Equal Employment Opportunity Commission (EEOC) shows a 24 percent increase from 1997 to 2011 in the total number of complaints filed by employees against their employer. As a business owner, are you prepared for the letter from Susan’s attorney? The EEOC also reveals that the average benefit awarded in a lawsuit is $291,667. Even if a disgruntled employee, potential employee or past employee, like Susan, has a meritless claim, do you have the resources to cover the cost to defend yourself?
Employment Practices Liability Insurance (EPLI) provides coverage for compensatory and punitive damages you may become legally obligated to pay because of a variety of employment practices. EPLI may also provide coverage for associated defense costs arising from a suit based on discrimination, workplace harassment, wrongful termination and other employment practices.
Jury Verdict Research highlights data (from ADA charges only) that show the average out-of-court settlement is $75,000 and defense costs are $15,000. If you’re able to get the suit dismissed, the average defense costs are $66,000. If the suit goes to trial and a jury gets to decide, defense costs increase to $125,000 and the average award is $217,000.
Now, it’s not all doom and gloom when it comes to employees. Let’s face it, most of our employees are great and we absolutely need them to operate. However, sometimes relationships with our employees change and emotions get the better of us. Or, maybe it’s not even you, as the boss, but your management team. Can you guarantee your management team will never offend, never discriminate, never harass or never wrongfully terminate an employee? Although you do all you can to train people to do the right thing, the right thing doesn’t always happen.
In today’s economy, employees are ultra-sensitive to how they are treated and are willing to take action if they feel wronged, as the 24 percent increase in complaints indicates. As a business owner, what can you do to protect yourself? With the increasing number of EPLI claims filed, doing the right thing doesn’t mean you are immune to a lawsuit from a potential, current or past employee. This is where EPLI can help.
To put this in a real-world context, the following examples are short and sweet.
Example 1: A supervisor in your business is accused of sexual harassment by an employee. EPLI will cover the defense of your supervisor.
Example 2: A past employee claims you fired them in an act of retaliation. Perhaps they blew the whistle on something. EPLI provides coverage for this.
The bottom line is if you have employees, EPLI should be considered as an endorsement on your existing business insurance. If your current agent hasn’t asked you about this coverage give them a call and ask about it.
For other questions about your business insurance, contact Paul Pukis at Mosaic Insurance Alliance at 425-320-4280 or SuperAgent@MosaicIA.com.