The Importance of Employment Practices Liability Insurance

Small business owners face an increasing risk of lawsuits from employees who allege discrimination, sexual harassment, retaliation and other claims. The changing legal environment also makes it difficult for small business owners to stay abreast of current regulations.

To help you protect against this risk, Employment Practices Liability Insurance (EPLI) provides coverage for wrongful employment act claims against your business by employees or applicants for employment that claim their legal rights have been violated. This may include employment-related claims made through the Equal Employment Opportunity Commission (EEOC) or the equivalent state administrative agency.

What EPLI Covers

Typically, an EPL policy provides coverage for reimbursement for settlements, judgments, and the expense of defending yourself when you are accused of:

• Failure to hire or promote
• Discrimination against employees or prospective employees
• Sexual or other harassment or coercion
• Wrongful termination, dismissal or discharge
• Retaliation
• Employment-related libel, slander, humiliation, mental anguish infliction of emotional distress, defamation or invasion of privacy.
• Employment-related misrepresentations to employee or applicant
• Other wrongful employment acts

Why it Pays to Have EPLI

According to Hartford Steam Boiler, the average EPL claim costs a business between $27,000 and $50,000. Ask yourself: If you were facing this type of a claim, would you be able to run your business as usual?

To better illustrate the need for EPLI coverage, here are a few claims scenarios — and their possible costs — courtesy of Hartford Steam Boiler:

• A small gift and flower shop owner was sued for pregnancy and gender discrimination when the claimant alleged that the employer had repeatedly treated her differently because of her gender and condition. The claimant provided several fellow employees who attested to the claimed adverse treatment by the employer. Settlement: $30,000; Legal fees: $12,000

• The receptionist at the sales office of an apartment complex complained of disability discrimination when the apartment building owner asked her to wear a hat to cover her lack of hair. The receptionist, undergoing cancer treatments, refused to wear any coverings on her head. The apartment building owner terminated her employment. She brought suit, claiming harassment and violation of the Americans with Disabilities Act. Settlement: $20,000; Legal fees: $8,500

• A store owner was sued by a customer for sexual harassment when the customer alleged that the son of the owner, also an employee of the company, made inappropriate comments and gestures and solicited the claimant for sexual favors. Settlement: $60,000; Legal fees: $20,000