Being an entrepreneur makes you the boss, but along with getting to choose your own hours, location, and business plan, it also means that you’re responsible for a lot of other things like commercial/business insurance. There’s a lot more to business insurance than getting the lowest business insurance quotes. It means understanding your business’s unique needs and the potential hazards that can threaten its success.
This brief video from the Insurance Information Institute touches on the ins and outs of small business insurance, including coverage for:
- Property loss
- Business disruption
- General liability (including product liability)
- Professional liability (also known as “Errors & omissions,” or “E&O”)
- Employment Practices Liability
- Workers’ Compensation
Credit: Insurance Information Institute
A new study by Hiscox revealed that, on average, a United States-based business with at least 10 employees has a 12.5% chance of having an employment liability charge filed against them. However, California has the most frequent incidences of Employment Practices Liability charges in the country and businesses in the state have a 42% higher chance of being sued by an employee than the national average! Not surprising!
Behind California, #2 is Illinois, #3 – Alabama, #4 – Arizona & Mississippi. and #5 is Georgia.
The Hiscox survey reveals that lower-risk states for Employment Practices Liability charges include Massachusetts, Michigan, Kentucky, Washington and West Virginia.
One way to help mitigate loss from an employee, potential employee, or former employee suing your business for an employment related claim is to purchase an Employment Practices Liability Insurance policy. Workers Compensation Insurance does NOT cover Employment Practices Liability related claims!
Source – PropertyCasualty360
I’ve touched on Employment Practices Liability Insurance in the past here.
In a nutshell, Employment Practice Liability Insurance provides protection for employers against claims made by employees, former employees, or potential employees for discrimination (age, sex, race, disability, etc.), wrongful termination of employment, sexual harassment, and other employment-related allegations.
Some Employment Practices Liability Insurance (EPLI) policies have “third-party” coverage included. “Third-party” coverage refers to claims made by non-employees, usually customers, who allege that an employee engaged in wrongful conduct such as sexual harassment or discrimination. Without a specific policy endorsement for third-party claims, EPLI policy forms do not cover this exposure. Without third-party coverage, a gap in coverage results because EPLI policies are written to cover employment related claims by employees or applicants against their respective employers.
Beware that coverage for third-party employment practices liability claims is excluded under commercial general liability (CGL) policies.
Companies that are heavily customer oriented, such as retail stores, restaurants, or auto dealerships, are most exposed to third-party liability claims. On the other hand, companies not involved much in customer interaction such as manufacturers are not nearly as exposed to these kinds of claims.
Third-party liability coverage is generally available by endorsement for additional premium and should be seriously considered by firms which face these exposures.
Our economy is in such a state where liability claims are on the rise. Many, but not all people, are out there are looking for any way they can make an extra buck during these challenging times. This rise in claims doesn’t only apply to Employment Practices Liability insurance, but general liability, workers compensation, and other forms of liability as well. Business owners beware!
Former ESPN announcer Ron Franklin, who was recently fired for allegedly making sexist comments to a sideline reporter before the Chick Fil-A Bowl, is suing ESPN for wrongful termination.
He confirmed the lawsuit on Wednesday but did not comment on the details of the lawsuit.
Franklin allegedly said to the sideline reporter, “Listen to me sweet baby, let me tell you something.” After the reporter told him not to talk to her like that, Franklin responded, “OK, then listen to me a-hole.”
Franklin later apologized in a statement. The longtime college football and basketball announcer worked for ESPN for 25 years.
What’s the moral of the story?
Employment Practices Liability claims such as this are not limited to major corporations such as ESPN. In today’s litigious climate, employers of all sizes are vulnerable. According to U.S. Equal Employment Opportunity Commission (EEOC) data, 41% of all EPL claims are brought against small employers with 15 to 100 employees. This is why any business with employees, or those which begin to hire employees must consider Employment Practices Liability Insurance (EPLI).
Employment Practices Liability insurance insures against claims of wrongful termination, failure to hire, failure to promote, various types of discrimination, as well as sexual harassment.
These insurance policies will reimburse your company against the costs of defending a lawsuit in court. They will also compensate for judgments and settlements. It doesn’t matter whether your company wins or loses the suit. Policies typically do not pay for punitive damages or civil or criminal fines, however.
One more benefit of these policies is that most include risk management services. Employment Practices Liability Insurance policies will typically offer an unlimited phone hotline service, online training, and state and federal compliance assistance from licensed attorneys.
If you are a business owner and are interested in more information on Employment Practices Liability Insurance, you can reach us here and we’ll be sure to follow-up with you:
The U.S. Equal Employment Opportunity Commission (EEOC) recently reported that for fiscal year 2010, it received nearly 100,000 new private sector charges of employment discrimination. This is the most ever in the agency’s 45-year history and a 7.2% increase over the number of charges filed in 2009*. For more information, click here.
What does it mean for employers?
Most experts agree that in a down economy, the opportunities for Employment Practices Liability insurance claims increase – employers are more likely to have to make difficult employment termination decisions, and with fewer alternatives available to them, employees are more likely to pursue legal remedies.
Employers facing difficult budget decisions may be tempted to reduce or eliminate their Employment Practices Liability insurance coverage. However, as the surge in EEOC claim filings shows, the risk to employers may now be greater than ever.
How much does an Employment Practices Liability insurance Policy Cost?
The cost of coverage depends on your type of business, the number of employees you have, and various risk factors such as prior claims or loss history. You can get a quote with very minimal information, often right on the spot. You would be surprised on how minimal the cost is in comparison to the coverage provided.
*Courtesy of Swett & Crawford Professional Services Group
How many times have you been to a company holiday party with an open bar where the booze is flowing and everyone’s getting loose? As the night progresses you begin to see that one co-worker of yours getting sloppy and progressively more sloshed? The words start to slur and the volume picks up as the inhibitions fall. Maybe it was you? Heck, maybe it was everyone there. Who knows what can happen from there!
An office holiday party can be a nice way to mark the season and to share a little warmth and appreciation with co-workers, but they can also be danger zones where inappropriate behavior could lead to highly unforeseen consequences. Employers want to share their appreciation for their employees and allow them to have a little fun, but serving alcohol at the office holiday party can be a huge source of potential disaster.
Some people interpret office parties as an invitation to let their guard down in ways that are a liability to the company. It is no big revelation that infusing a holiday party with alcohol can lead to lowered inhibitions and poor judgment. Even a well-meaning and otherwise mild-mannered employee might throw out an inappropriate joke or comment after a few drinks. And even if the party itself ends without incident, employers can still be liable for any harm caused by an intoxicated employee on his or her way home.
Alcohol consumption just might be the most sensitive issue an employer must consider when planning an office holiday party. Sure, employers can always opt to have a nonalcoholic gathering (party like it’s prohibition) which would significantly reduce the likelihood of booze-induced problems, but this might be a little extreme to some. Short of complete ban of alcohol, employers might want to consider some of the following options, and implement measures specific to the makeup of their workforce:
- Have an all-cash bar, and staff it with a professional bartender.
- Cut off the free flow of alcohol well before the party ends.
- Provide employees with a specific number of drink tickets redeemable at the bar.
- Restrict the type of alcohol available, either none or only beer and wine
- Provide plenty of food to balance the effect of a couple drinks.
- Provide for company-paid taxis to ensure a safe trip home for any employees who drink at the holiday party.
- Collect car keys from employees who drink.
- Offer door prizes to employees who volunteer as designated drivers.
- Station a high-level management employee at the exit to wish everyone goodnight, while monitoring for tipsy party-goers.
- Hold the party at a location that discourages driving, such as a hotel
- Invite deterrents. Sometimes the presence of a spouse or significant other can help employees keep their behavior and their drinking under control.
- Holiday party hosts should be on the lookout for any revelers who have overindulged and take whatever steps are appropriate, including ensuring that no further alcohol is consumed by such employees and arranging for transportation.
Maybe you have other ideas that are just as effective. Whatever it might be, even if you take every measure in the book to curb liability, there is no guarantee that nothing problematic will happen. I’m not saying to let your worries get the best of you to the point you can’t enjoy your own party, but don’t turn your head and look the other way if a dicey situation arises. Who knows what can happen when you throw booze into the equation. It’s better to be safe than sorry!
If you’re a small business owner, chances are you don’t have the luxury of your own Human Resources department to oversee employment law compliance or employee relations and communication. You probably have your hands tied in many other areas just trying to make it through each day. To make your job more difficult, state and federal bureaucracies throw lists of employment statutes at you that you must comply with or run the risk of getting sued. Among the long list, the following statutes are some of the more noteworthy ones, but certainly not the only to be concerned about:
- Title VII of Civil Rights Act of 1964 (Title VII): This statute is a common source of employment litigation. This Federal statute makes it unlawful for an employer to refuse to hire or terminate any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment because of race, color, religion, sex, including sexual harassment, national origin, and pregnancy, childbirth, or related medical conditions.
- Equal Pay Act: This act deals specifically with unlawful differentials in compensation based on sex. The Equal Pay Act makes it unlawful to pay employees at rates less than the rate applicable to employees of the opposite sex for equal work for jobs requiring equal skill, equal effort, equal responsibility, and where the work is performed in similar working conditions.
- Americans with Disability Act (ADA): The ADA prohibits discrimination on the basis of disability against a qualified prospective or current employee, defined as an individual with a disability who, with or without reasonable accommodations can perform his or her essential duties of the employment position for which the person desires or holds. Many states also have statutes that place additional requirements upon employers.
- Age Discrimination in Employment Act (ADEA): The ADEA applies to employees who are age 40 or over and makes it unlawful for an employer to fail or refuse to hire or terminate any employee or otherwise discriminate against any individual with respect to his or her compensation, terms, conditions, or privileges of employment because of their age. Many states apply ADEA to all ages prohibiting age discrimination of any kind.
- Fair Labor Standards Act (FLSA): The FLSA sets the minimum wage and maximum hour/overtime requirements. The Wage and Hour Division of the Department of Labor manages the administration of the FLSA.
- Family Medical Leave Act (FMLA): The FMLA offers certain employees with up to 12 weeks of unpaid, job protected leave a year, and requires health benefits to be maintained during leave as if the employee continued to work instead of taking the leave. This statute is the responsibility of the Department of Labor (DOL).
As a business owner, how do you feel when you read these? Content and compliant? Or disturbed? What if a lawsuit was brought against your business tomorrow for wrongful termination or emotional distress, among other things? You probably wouldn’t feel as bothered if you knew you had an Employment Practices Liability Insurance policy in force to protect your business.
As I’ve written on prior posts, Employment Practices Liability Insurance provides protection for an employer against claims made by employees, former employees, or potential employees. It covers discrimination (age, sex, race, disability, etc.), wrongful termination of employment, sexual harassment, and other employment-related allegations. Employment Practices Liability Insurance (EPLI) is needed by any business with employees and those which begin to hire employees. EPL claims are not limited to major corporations. In today’s litigious climate, employers of all sizes are vulnerable. In fact, six out of ten employers have faced employee lawsuits within the last five years.
The cost of employment practices liability coverage depends on your type of business, the number of employees you have, and various risk factors such as prior claims or loss history. Your insurance agent can provide a quote with very minimal information, often right on the spot. If you don’t have a policy in force now, you must consider calling your insurance agent right away to discuss. This might be your best alternative to not having your own HR department or HR director.
From the Las Vegas Review-Journal:
A one-armed man who was rejected as an applicant for a taxi driving job won a $30,000 settlement from Vegas Western Cab Co., the Equal Employment Opportunity Commission said Thursday.
The EEOC said it reached a settlement with the taxi company in the lawsuit it filed on behalf of Joel Walden, a single-arm amputee.
When he applied for job as a taxi driver in 2006, Walden met all the requirements in the taxi job announcement, was experienced as a driver and had a clean driving record, the commission said. However, the taxi company refused to hire Walden because of his disability, the EEOC said.
What does this have to do with me?
Business owners, you’re not immune to these types of claims. Employment Practices Liability Insurance (EPLI) is needed by any business with employees and those which begin to hire employees. It used to be that EPL claims were limited to major corporations. This is no longer the case. In today’s litigious climate, employers of all sizes are vulnerable. According to EEOC data, 41% of all EPLI claims are brought against small employers with 15 to 100 employees.
Employment Practices Liability insurance insures against claims of wrongful termination, failure to hire, failure to promote, various types of discrimination, as well as sexual harassment.
These policies will reimburse your company against the costs of defending a lawsuit in court, even if a claim is groundless or fraudulent. They will also compensate for judgments and settlements. It doesn’t matter whether your company wins or loses the suit. Policies typically do not pay for punitive damages or civil or criminal fines, however.
The cost of coverage depends on your type of business, the number of employees you have, and various risk factors such as prior claims or loss history. Your insurance agent can provide a quote with very minimal information, often right on the spot.
Two different methods are used by insurance companies to determine coverage when writing liability insurance:
- “claims made” policies
- “occurrence” policy
Most often, commercial general liability insurance is written on an occurrence basis while employee benefits liability, professional liability and employment practices liability insurance will be written on a claims-made coverage form.
On an “occurrence” policy, the coverage trigger is the date of the event or accident giving rise to a claim. The policy in force on the date of the event causing the loss must respond with both defense and/or indemnity. Even if a claim arises years after a policy has expired, the date you receive notice of the claim doesn’t matter. Occurrence policies do not provide coverage for prior acts. They do remain available for claims that arise years after a policy term has expired, however. If an accident or event occurs during the term of an occurrence policy, that policy must respond to any future claim.
As for claims-made policies, coverage is triggered by the date you first became aware and notify the insurance carrier of a claim or potential claim. The carrier’s policy in force on the date you became aware and give notice is the insurer who must defend and settle the claim. A claims-made policy may reach back in time and provide coverage for claims made today from negligent acts, errors or omissions that occurred years before the policy was purchased.
The following conditions must be met before prior acts coverage is granted:
- You must receive notification of a claim or potential claim situation during the policy period.
- The claim or potential claim situation must be reported to the insurer during the policy period.
- The negligent act, error or omission giving rise to the claim must occur after a “prior acts” or “retroactive” date listed in the policy declarations.
- You or your firm had no prior knowledge of a mistake, error or controversy on the date coverage was purchased.
The “prior acts” or “retroactive” date is a crucial piece in a claims-made policy. Your policy declarations page will clearly identify a “retroactive” date that determines how far back prior acts coverage extends. Claims resulting from services rendered before the “retroactive” date are not covered.
Think before you decide to cancel or non-renew your claims made liability policy
If you decide to cancel or not renew your claims-made policy, you must consider purchasing an Extended Reporting Period or “TAIL” coverage to insure you for incidents which occurred while the policy was in force but was reported after the policy was cancelled. For example:
If you purchased a claims-made policy with an effective date of January 1, 2010 and chose to cancel or let the policy lapse without TAIL coverage or an Extended Reporting Period — any claims made after December 31, 2010 would not be covered. If you were sued in 2012 for a wrongful act committed in 2010 (during which time you were covered), the insurance company would not be responsible for paying any claim. An Extended Reporting Period Endorsement (TAIL) “extends your right to report a claim” to your prior insurance company after the policy has ended, canceled or lapsed.
As I often note, make sure your insurance agent is knowledgeable and experienced with claims made insurance forms. It gets complicated. Also, note that I am writing this from an insurance perspective; only to be used for informational purposes! My intent isn’t to provide legal advice here. That’s what lawyers are for…
This week in the news, the National Football League is at the center of an alleged harassment controversy. Mexican TV reporter, Ines Sainz, was covering the New York Jets for TV Azteca at last Saturday’s practice. Allegedly, when she went into the team’s locker room to interview QB Mark Sanchez, who has Mexican heritage, she said she heard comments from players such as “Oh my goodness she’s here,” and “OK, I want to be Mexican.”
The story is making news this week, however, Sainz said she couldn’t definitively say whether the Jets’ conduct crossed a line that would warrant discipline. Sainz noted that she did not initiate the complaints about Jets players’ behavior. She said she mostly ignored the treatment Jets players were giving her in the locker room.
Whether or not Sainz was harassed is to be determined, but this brings to light harassment issues in the workplace and how business owners can be exposed to these types of potential claims. Employment Practices Liability Insurance (EPLI) provides protection for an employer against claims made by employees, former employees, or potential employees relating to many types of employee related lawsuits including claims of sexual harassment, discrimination, wrongful termination, failure to employ or promote, etc.
Due to today’s economic times, there are significant increases in the number of employment practices liability related claims. Statistics show that businesses are four times more likely to face EPL claims than a fire loss of ‘slip and fall’ liability claim. Six out of ten employers have faced employment lawsuits in the past five years. The average EPL claim cost is about $163,000.
Even if a groundless or fraudulent claim is brought against your business, EPLI policies will reimburse your company against the costs of defending a lawsuit in court.
No business is invisible to Employment Practices Liability claims, not even professional football franchises. Is your business protected?