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Employment Practices Liability Insurance

from Trapp Insurance Group

We live in a litigious society. These days, it is difficult to terminate employment or run a business without the risk of a lawsuit. More and more people in this country are suing employers for wrongs, whether real or perceived, and companies, particularly small businesses, are paying the price. Your business policy’s liability insurance may not protect you from this sort of lawsuit. Instead, you will need employment practices liability insurance.

When shopping for a policy, you may be able to benefit from the assistance of Trapp Insurance Group We have relationships with several different insurance carriers so we can easily provide you with a variety of competitively-priced insurance policies for your review.

Lawsuits against Employers: Some Sobering Statistics

  • Employee lawsuits have risen approximately 400% over the last 20 years
  • Of these, wrongful termination suits have risen more than 260%
  • 41.5% of these lawsuits were brought against private employers with fewer than 100 employees
  • When employee lawsuits go to trial, the employee wins more than 63% of the time
  • The average cost to settle an employee lawsuit out of court is $75,000
  • The average amount awarded to employees in jury trials is $217,000

What Is Employment Practices Liability Insurance?

Employment practices liability insurance, commonly referred to as EPLI insurance, is specifically designed to protect employers from lawsuits brought on by employees. It provides coverage for many situations that general liability insurance does not.

Even lawsuits that are thrown out of court or are won by your company are expensive, due to the high cost of securing legal defense. Therefore, this insurance coverage is very important as financial protection for your business enterprise.

Consider the Costs of Defending Employee Lawsuits

  • Average court costs and legal fees when settled out of court: $15,000
  • Average court costs and legal fees when the case is dismissed: $50,000 to $75,000
  • Average court costs and legal fees when the case goes to trial: $125,000

What Does EPLI Insurance Cover?

EPLI insurance will provide compensation for losses caused by employee lawsuits, including all incurred court costs and legal fees.

While frivolous lawsuits commonly happen, many petitioners do have legitimate claims. Even if your company does not intentionally violate employment laws, you still can be held liable. For this reason, it is particularly important to have a well-written employee handbook and policies and procedures manual available, and to ensure that employees adhere to the established guidelines.

Some examples of reasons that a lawsuit may be filed against your company include the following:

  • Wrongful termination: This is the most common claim brought against employers in lawsuits. The EEOC states that is it illegal to fire an employee on the basis of their age, race, national origin, sex, or because of a disability. It is also illegal to terminate employment because an employee did any of the following:
    • Took a leave of absence under the Family Medical and Leave Act (FMLA).
    • Reported wrongdoings to authorities, as dictated by the Whistleblower Protection Act.

Even if an employee’s termination had nothing to do with any of these situations, if a judge is convinced otherwise, your company may be held liable for lost wages and punitive costs.

  • Harassment: These lawsuits most frequently involve sexual harassment, but can also include cases of workplace violence or bullying. The harassment may come from senior administrators, supervisors or co-workers. If the employee can prove that the company was aware of the problem and did nothing or made inadequate attempts to remedy it, the company may face fines and penalties if the case is brought to trial.
  • Discrimination: These cases involve situations where an employee is turned down for promotions or advancement opportunities on the basis of age, sex, race, national origin or disability. Employees typically win these cases when they are able to show a trend toward discrimination within the company.
  • Breach of contract: If your company has a contract with an employee and you violate the terms of that contract, the employee may file a claim against you. An employee who can prove that damages resulted from this breach is likely to win.
  • Emotional distress: Employees who feel that your company fosters a hostile work environment or who feel subjected to overly stressful situations in the workplace may file a lawsuit against your company. These cases are more difficult to prove in a court of law, but the resulting legal fees may still prove burdensome.
  • Other violations: Some other potential employee lawsuits that EPLI insurance can protect you from include wrongful denials of workman’s compensation, statute violations, wage and hour violations, loss of consortium, drug-testing false-positives, libel and slander.

Another employee lawsuit that is showing up in courts involves invasion of privacy. This usually occurs if employees feel they have been wronged as a result of cyber-snooping or video monitoring. This type of claim is not covered under most EPLI policies, but you may be able to get coverage through a newly created cyber liability and network security policy.

Is EPLI Insurance Expensive?

The cost of EPLI insurance coverage will vary from one company to another. Some factors that may influence cost include:

  • The number of employees
  • The amount of coverage purchased
  • Whether or not your company has an anti-discrimination and anti-harassment policy in place
  • Whether or not your company has had any lawsuits files against it in the past

In general, a company with about 25 employees can expect to pay anywhere from $2,000 to $4,000 a year for a policy. While this cost may sound rather high, is it far lower than what legal fees alone would cost for just one lawsuit. The only way to know for certain how much it will cost to cover your company is to request rate quotes from a variety of insurance companies, which you can do through us.

How to Find EPLI Insurance for Your Business

Companies are vulnerable to lawsuits brought on by their employees. The most vulnerable are small companies that cannot afford their own in-house legal team and must pay the high costs of legal defense.We can help you make certain that you are adequately covered against this threat.

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