The Coverage Every Employer Needs But Few Purchase

Boss with employees insurance Employment Practices LiabilityEvery employer works very hard to provide the best environment for their employees to be successful, but no matter how hard we try, we are at risk every day of the week from an Employment Practices Liability allegation. Notice how I said “allegation.” That is all it takes for you to be at risk of defending yourself and spending money on lawyers when you could be investing that money into your business.

People always tell me, “Geez Shawn, I’m going to be insurance poor here.” I understand that feeling, and while there are certain things that you would want to self-insure, this is definitely not one of them. Self-insure something that you know won’t bankrupt your business if there was a loss against it, like a piece of equipment, for example, with a known value. Self-insure the comprehensive coverage on your vehicle, but do not self-insure an exposure that can get into the seven figures and may very well be out of your control.

As the employer, you have managers and supervisors to be your eyes and ears to ensure a smooth, efficient operation. But what if one of the managers was acting inappropriately with one of his or her subordinates? What if a supervisor was discriminating against a specific employee in the promotion process? What if other employees are bullying an employee and the manager doesn’t do anything about it? What if a supervisor is sexually harassing a subordinate?

Many other types of liability claims are being filed today, and they’re making the news media on an almost daily basis. What types of other claims? For example, many employees are filing invasion of privacy claims. A group of employees sued their employer after they found out that their activities were being monitored after hours. If they’re not doing anything considered illegal, an employer can’t monitor anything outside their offices.

Employee on Instagram Account insurance Employment Practices LiabilityAnother big liability to watch out for is an employer monitoring or accessing an employee’s social media posts. While many companies review an applicant’s social media profiles prior to hiring them (60% admitted to this as recently as 2016), once they are hired an employer can’t use their posts to fire them, as long as they aren’t breaking any laws.

Surprisingly, some employers refuse to hire a prospect if she is pregnant. That violates the Pregnancy Discrimination Act, which prevents an employer from holding pregnancy against an applicant, even though they realize that employee will soon be taking time off. The Act requires employers to allow an employee to work at her job as long as she’s able to perform her job functions. Currently, about 30% of liability claims are based on sexual harassment and pregnancy claims.

Pregnant woman insurance Employment Practices Liability

Another big claim area is not paying interns for the work they do. For years it was an honor, even a rite of passage, to work for free as an intern at a company. Today, that’s not the case — interns must be paid for the work they do. Otherwise, the employer may be liable for back wages and fines. It’s all part of the Labor Standards Act, and it can get costly to companies that don’t adhere to the law.

These are just a few of the different allegations that can be made and are made against businesses every day. In comparison to the potential loss your business could experience, the premium for this coverage is very reasonably priced. While the cost will vary based on business size, type of business and other factors, it is a smart investment that can help prevent major losses in the future.

Employee calculating bills insurance Employment Practices LiabilityHere are some astounding statistics that support this argument: the average cost to settle a discrimination suit is $125,000. The median judgment against an employer who is sued is around $200,000. And if you think settling a claim out of court will save you money, think again. The average out of court settlement, including legal fees, is $75,000. These numbers are huge, and the premium to cover these types of claims pale in comparison to the liability your company is up against.

The market is wide open with this type of coverage. Various companies offer differing plans, so when getting quotes, you’ve really got to rely on your insurance professional to help you pick the plan that best suits your unique needs. Limits are available as low as $100,000 and as high as $1,000,000. Defense can be inside the limit, or you might have a separate limit for defense. With wage and hour violations being alleged more and more, some plans offer defense only for this while others will not provide this coverage.

Should you have questions regarding this or any other coverage, please feel free to contact me via email at sdwyer@lckinsurance.com.

Shawn Dwyer is the Vice President of Sale at Leap/Carpenter/Kemps Insurance Agency in Merced, CA.

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