Why Employment Practices Liability Insurance Coverage Is So Important

Quite honestly, I am floored by how many small businesses do not purchase Employment Practices Liability Insurance (EPLI). For those who are unaware, Employment Practices Liability is coverage against claims by employees alleging that they suffered damages as a result of the employer’s discrimination, wrongful termination, sexual harassment, or various other employment-related offenses.

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When saying I am floored by how many small businesses do not purchase EPLI, I am basing that off my own experience in helping businesses with their various risk exposures and insurance needs.

I understand there’s a price tag associated with the coverage, but there’s a reason why premiums can be hefty in California for EPLI.  Statistics show businesses are more likely to face an employment claim than a property or general liability claim.

Check out these statistics:

• The average amount paid for out of court settlement is $40,000.
• Defense of an average EPL case, through trial, costs over $45,000.
• The median compensatory award for EPLI cases is $218,000.
• 67% of all employment cases that litigate result in judgment for the plaintiff.
• 41% of all EPLI claims are brought against small employers with 15 to 100 employees.
• Six out of ten employers have faced employee lawsuits within the last five years.
• 91,503 charges were filed in 2016, slightly higher than the past two years.

Most importantly, buying an EPLI policy provides defense coverage in the event of a claim or suit regardless of the legitimacy of the claim. A simple allegation cannot be ignored. When you receive that summons in the mail, you cannot just throw it away. It must be addressed and defended. EPLI provides defense coverage to protect your business.

Also, when buying EPLI, you have 24/7 access to Human Resource professionals and Employment Law attorneys to consult with if you need guidance on how to address an employment issue. Carriers don’t want to pay claims, so this offering is pushed on their part to help mitigate the potential of a more serious matter.

In my opinion, Employment Practices Liability Insurance is a must for any business with employees in California. The annual premium cost will seem like pennies on the dollar compared to the cost of a claim. Don’t believe me? Take a second look at the statistics above. You should act today before it’s too late. You can’t buy a policy for an Employment Practices claim or incident that already happened.

-JK