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A Publication of WTVP

To follow are some statistics from United Agencies, Inc. From October 1, 1993, through September 30, 1994, the Equal Employment Opportunity Commission and related state and local agencies received 156 discrimination complaints. As of May 1, 2003, the Equal Employment Opportunity Commission had a backlog of more than 100,000 complaints, and the average complaint took more than a year to handle. In 2002, more than 13,000 complaints of sexual harassment were filed with the EEOC. Settlements for cases in 2003 exceeded $50 million. Defense costs were several times this number. A recent telephone poll found that almost 31 percent of all female workers claimed to have been the object of sexual harassment at work. Seven percent of all male workers also claimed to have been sexually harassed.

In the face of this increased risk to your business, it’s also increasingly likely that your current insurance excludes coverage for employment-related claims. Most comprehensive general liability policies specifically exclude employment-related claims. For small for-profit businesses, a directors and officers policy may offer a limited form of insurance coverage, but it probably won’t extend coverage to the business entity. Other forms of insurance, such as fiduciary liability coverage, are unlikely to cover these types of claims.

This is a list of other claims that would only be covered with an Employment Practices Liability Insurance (EPLI) policy: sexual harassment, wrongful termination, discrimination, statute violation, negligent hiring, negligent supervision, negligent promotion, and negligent retention.

EPLI covers the defense costs, judgements, and settlements but may or may not cover punitive damages, fines, or penalties. Depending on the type of business and the amount of exposure, a typical company can purchase a coverage limit ranging anywhere from $1 million to $25 million. As with most coverage, additional limits can be purchased. This limit may or may not include legal costs associated with any resulting judgements or settlements against the company. EPLI coverage usually encompasses the corporate entity, employees, former employees, and directors and officers. A few insurers also include volunteers in their coverage. In addition, some EPLI policies cover only managers and supervisors, as opposed to every employee. Each company should examine the exposure for all employees and volunteers and decide if all workers need to be insured. Several factors affect the risk level, including the type and size of the business. To determine the risk, the insurer generally will evaluate the business’ employee handbook, employment applications, and personnel policies, as well as analyze past claims, lawsuits, and allegations.

This is just a small example of what exposures exist and what EPLI coverage constitutes. I encourage you to spend time with your insurance professional in reviewing the need for the above services and others that pertain to your specific business. The insurance industry is changing rapidly based on market conditions. Make sure you do periodic reviews of your business in relationship to the changing insurance marketplace. IBI