Business Insurance

Employment practice liability insurance covers your small business against lawsuits involving one of your employees who believes their legal rights as an employees have been violated.

There has been an increase in the number of lawsuits filed by employees against their employers and these numbers continue to rise yearly. The perception is that most lawsuits are filed against large corporations, this statistic no longer appears to be the norm. Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Business owners insurance Policy (BOP). An endorsement changes the terms and conditions of the policy. Their are companies that now offer this coverage on a standalone basis however the cost will be substantially higher than if it is included in your commercial package policy or a BOP policy. 

Employment practice liability insurance provides protection against many kinds of employee lawsuits, including claims of:

• Sexual harassment – Conduct involving unwelcome sexual advances, requests for sexual favors, and verbal, visual, or physical conduct of a sexual nature.
• Discrimination – Claim are typically brought by the Equal Employment Opportunity Commission (EEOC) against an employer, in which the EEOC alleges that more than 15 individuals were victims of discrimination by that employer.
• Wrongful termination – The act of terminating an employee in a manner that is against the law.
• Breach of employment contract – employee alleges that an employer has breached the terms of an agreement governing the terms of employment, of which there are two basic types: (1) a written employment contract and (2) an implied contract of employment. 
• Negligent evaluation – When an employee asserts that the employee’s performance evaluation was excessively negative, unfairly low, or otherwise inaccurate and therefore did not reflect the employee’s actual, higher level of performance
• Wrongful Failure to employ or promote – A type of employment-related claim alleging that a qualified employee was denied a promotion. Claims asserting wrongful failure to promote are often combined with discrimination claims. 
• Wrongful discipline – A type of employment-related allegation that either (1) an employee was disciplined for an infraction that did not occur, or (2) if the employee did commit the infraction, the discipline for the employee could be considered excessive. 
• Deprivation of career opportunity –  A claim alleging a failure to provide specific types of training that could have otherwise advanced an employee’s career. For example, if an employee is not permitted to enroll in a course for a manager position in which they are qualified, this could give rise to a claim of wrongful deprivation of a career opportunity.
• Wrongful infliction of emotional distress – Involves some kind of conduct that is so terrible that it causes severe emotional trauma to the victim.
• Mismanagement of employee benefit plans – When the employer who is controlling the management “Fiduciary” of employee benefit plans, investment of funds, and controlling or disposing of plan assets is accused of being in breach their fiduciary duties.  This risk remains even if you hire a third party to manage your plans.

The cost of employment practice liability insurance depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. Legal cost are covered by your insurance policy, whether your company wins or loses the lawsuit. It is important to point out that employment practice liability insurance policies typically do not pay for punitive damages or civil or criminal fines.  Liabilities covered by other insurance policies such as workers compensation are excluded from employment practice liability insurance policies.

While you can not eliminate the risk of a claims there are steps that can be taken to reduce employee lawsuits.   

• Educate your Managers and employees about proper behaviors while at work.
• Create effective hiring and screening programs to avoid discrimination in hiring.
• Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
• Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
• Proper documentation is critical whenever there is a possible occurrence  
• Make clear the steps your company needs to follow and is taking to prevent and solve employee disputes.
• Take every report very serious.