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Don’t Think Twice About Purchasing EPLI Insurance


Purchasing EPLI InsuranceEmployers Face an Increase in EPLI Exposures, Need Coverage

The likelihood of experiencing an employment practice claim is high and rapidly rising regardless of a company’s revenue, number of employees or corporate structure. This is one of the principal takeaways in a recent research paper released by Advisen, a firm that provides insights for the global community of commercial insurance professionals.

In fact, companies with few as 100 employees can expect to receive an employment practices claim once every three years, according to Westlaw’s 2012-2013 Edition of Jury Awards and Statistics. Moreover, the probability of a plaintiff winning an employment practices suit at trial is 51%.

What are the reasons for a rise in claims? You have the Equal Employment Opportunity Commissions (EEOC) taking an increasingly aggressive stance to go after companies allegedly in violation of employment laws. Moreover, the EEOC has made the process to bring litigation easier, including lowering the barrier for class-action litigation. You also have more employees aware of their rights due to media coverage and high-profile employment disputes. Some examples of this we’ve have covered here in our blog, including cases involving wellness programs that are potentially in violation of the Americans with Disability Act (ADA), and the popularity of wage and hour disputes. Additionally, there is an increased reliance on the Internet and social media, which has opened new avenues for employment liability-related risk particularly difficult for employers to manage.

What type of employment-related exposures do employers face? The EEOC recognizes 11 types of employment practices discrimination: age, disability, equal pay/compensation, genetic information, national origin, pregnancy, race/color, religion, retaliation, sex and sexual harassment.  For the fiscal year 2013, the EEOC reported 93,727 charges of discrimination. The claims break down as follows:

  • Race Discrimination Claims: 33,068
  • Sex-based Discrimination Claims: 27,687
  • Disability Discrimination Claims: 25,537
  • Age Discrimination Claims: 21,396
  • National Origin Discrimination Claims: 10,642
  • Religious Discrimination Claims: 2,721
  • Color Discrimination Claims: 3,146
  • Retaliation Claims: 38,539
  • Equal Pay Claims: 1,019
  • Genetic Information Non-Discrimination Act (GINA) claims:  333

Employment Practices Liability Insurance is Critical

Employment Practices Liability Insurance (EPLI) has been available for about 25 years, designed to step in to protect employers in the event of employment-related allegations. It provides insurance coverage for wrongful acts arising from the employment process, with the most frequent type of claims relating to wrongful termination, discrimination, sexual harassment and retaliation. Other types of claims include inappropriate workplace conduct such as employment-related defamation, invasion of privacy, failure to promote, deprivation of career opportunity and negligent evaluation. Some policies may also provide sublimits for immigration claims, such as fines for failure to check immigration status, and wage and hour claims. But it’s important to note that this is only for defense costs and not for wage losses. Typical exclusions in an EPLI policy include bodily injury, property damage, contract dispute, intentional/dishonest acts, unpaid wages and rest and meal times.

An EPLI policy is available as a standalone policy or can be a component of a combined policy for professional services and corporate liability (Directors & Officers, Cyber Liability, Professional Liability, Fiduciary Liability, for example).

Why Buy EPLI?

The Advisen report cited data from law firm Murphy Austin Adams Schoenfeld LLP, indicating “the average cost to have a meritless claim dismissed is $10,000 to $15,000.” Furthermore, for those companies that don’t have robust human resource practices and choose to settle quickly, the cost of the claim could run an additional $10,000 to $50,000 more. And if the other party is determined and an employer’s case is not that strong, a company could expect $150,000 to $200,000 for the cost of defense and settlement, according to Murphy Austin Adams Schoenfeld LLP. The process could take two years from the beginning to end.

The cost to purchase an EPLI policy is well worth the peace of mind to have the security of not having to incur the costs involved in defending a suit and a potential settlement. Just take a look at employment jury awards for 2011, courtesy of Westlaw:

  • Median award of employment practice claim $325,000: up from $172,500 in 2010
  • Amount of claims in the $250,000 to $1 million range: rose from 34% to 56%
  • Award median for age cases: $247,800; disability $292,500; race $215,652; and sex $150,000
  • Median retaliation awards: $208,275 with an award mean of $741,971
  • State verdicts averaged more than 1.5 times the average federal court verdict award
  • Average employment practices settlement median was $100,000 with a settlement mean being $178,063

Axis Insurance Services can provide you with EPLI insurance, designing a policy that suits your industry segment, the type and size of your operation and the exposures you face. We specialize in EPLI along with other key management liability coverages and work with top-tier insurers in this area. Contact us at (877) 787-5258.

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Blogged on: November 17, 2014 by Mike Smith
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