Every employer, no matter how small, faces the specter of being sued by a past, present, or prospective employee at some time.
Employment practices claims have become so widespread that businesses are more likely to have an employment practices liability claim than a general liability or property loss claim.
Nearly three-quarters of all litigation against corporations today involves employment disputes. The cost associated with an employment practices claim can be significant.
In 2018, the Equal Employment Opportunity Commission resolved 90,558 charges of discrimination and recovered about $505 million in remedies for discrimination plaintiffs. In addition, the EEOC recovered nearly $70 million for victims of sexual harassment through litigation and administrative enforcement that year, up roughly 50% from $47.5 million in 2017.
The massive jump in sexual harassment claims and recoveries is a direct result of a surge in lawsuits since the start of the #MeToo movement, which has emboldened many victims to come forward and file complaints.
Keep in mind, the above are just penalties and do not include defense costs, which can exceed $100,000 per claim for employers.
For these reasons and more, employment practices liability insurance is crucial for any employer. The risks of being sued by an employee for discrimination or harassment have increased substantially.
Employers need EPLI coverage because comprehensive general liability policies and workers' comp policies exclude employment-related claims.
What does employment practices liability insurance (EPLI) cover?
EPLI policies cover business owners as well as directors, officers, and managers, and include:
Some policies also cover employees. Additionally, you can buy third-party policies to cover claims brought by non-employees, such as clients.
Types of actions covered include:
NOTE: Wage and hour claims, or disputes regarding overtime pay for non-exempt employees, have become more expensive in recent years, so most EPLI policies exclude this coverage. Business owners may be able to find endorsements to add wage and hour coverage.
The cost of employment practices liability insurance
EPLI claims can be costly. The average cost of a discrimination claim is $125,000, and 25% of judgments exceed $500,000.
Most businesses are wise to have at least $1 million in coverage. However, higher coverage limits increase your premium cost, so you want to balance your coverage needs and your budgetary concerns.
Contact your account executive for help in gauging your EPLI coverage needs.
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In February 2020, The Friedman Group joined AssuredPartners, the 11th largest insurance brokerage in the U.S. This partnership provides us access to additional capital and a national footprint that enables us to continue to negotiate the most favorable coverage terms and conditions for our clients, and allows us to provide an even broader spectrum of risk management support services.