Having solid workplace policies in place creates a certain level of protection from employee discrimination claims, but even the best contract or employee handbook won’t prevent a disgruntled employee from filing a lawsuit, nor are they guarantees that a jury won’t award them a claim that could wrap you up in appeals for years. Employment Practices Liability Insurance provides expert defense, even if a lawsuit is frivolous, as well as claims payments if a settlement is reached or a judgment rendered.
The Employee Handbook Says NO!
I know all of your employees always do exactly what they’re told! Each one has read the employee handbook, signed off on the non-discrimination and diversity policy!
They would never tell a dirty joke! They would never forward an untoward email!
Obviously, this is an entirely unrealistic ideal of what happens in the workplace. Whether intentional or not, mean spirited or “all in good fun,” claims of a hostile work environment can creep up, sometimes when you least expect it. These situations are serious, and the financial ramifications for an employer can be significant.
Sexual Harassment isn’t the only concern.
Sexual Harassment claims now lag behind age discrimination. When the economy took a turn for the worse, older workers were hit hardest, and some felt they were terminated in a discriminatory manner. When a lawsuit of this nature gets served to your business, your normal Commercial General Liability policy will not cover it because Employment Practices Liability is specifically excluded.
Employment Practices coverage doesn’t just insure against sexual or age discrimination. Religion, Sexual Orientation, Race and more could all be the basis of a discrimination case. The complainant doesn’t even need to be an employee – it could be an applicant or interviewee who didn’t get the job, or even a customer, prospect or vendor if you have Third Party Coverage.
Some key items to look for on an Employment Practices Liability Insurance Policy.
Defense: some policies offer defense outside of the limits – meaning the lawyer’s fees the insurance company pays to defend the claim will not come out of the aggregate limit that could be paid for claims.
To Illustrate: John’s Deli has a sexual harassment claim that settles for $25,000, with $5,000 in defense lawyers’ fees and no deductible. If John had defense outside the limits, and a $25,000 EPLI limit, he wouldn’t owe anything. If defense was inside the limit, the calculation would look like this: $25,000 limit – $5,000 lawyers = $20,000 remaining limit – $25,000 settlement = $5,000 that John owes to the insurance company!
Third Party Coverage: EPLI will always cover applicants, and employees, but what about a customer who claims you discriminated in the way you handled their account? What about a vendor who feels they were harassed by the warehouse crew? Those are third parties whose claims are covered by this modification to the policy.
Depending on your industry EPLI can be very inexpensive.
Call New Heritage Insurance at 717-684-6409 for an evaluation!
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