Common Misconceptions about Employment Practices Liability Insurance and Lawsuits

lawyer-collageDiscrimination suits against businesses are becoming more common in courtrooms. In 2009, people filed more than 130,000 complaints with the Equal Employment Opportunity Commission. When it comes to the total cost of discrimination suits against businesses, there is no specific figure. However, a fair estimate is about $2 billion annually.

There is a type of insurance designed to protect businesses from lawsuits, which is called employment practices liability coverage. EPLI is offered by insurance companies as part of a business product line. It is important to note that there is a disparity, which is that many eligible companies do not buy this type of insurance. This is surprising to many industry experts due to America being a highly litigious society.

There are many myths tied to EPLI, so it is necessary to dispel them to better understand just how much businesses truly need to be protected from litigation. One common myth is that a business is immune to lawsuits due to a special company structure or other factor. Regardless of the type of company or what structure is used, every business is still susceptible to lawsuits. Some larger businesses may not have the HR practices or policies they need to keep a discrimination suit from proceeding. If a business does not have a structured setup, it is more vulnerable than the owners might think.

Another common misconception is that businesses can absorb the costs of lawsuits if they are filed. However, this is far from the truth. Any type of legal action will be costly, and the cost is not always just financial. Management staff and other workers will be asked to testify in most cases, so they will have less time to focus on their work priorities. Such an upsetting event will affect production quality or the bottom line. Experts say that it is common for businesses to file for bankruptcy due to lawsuits.

In addition to lost income, the specific costs related to discrimination lawsuits is very telling. In two cases that occurred in 2005, large corporations agreed to pay between $3 million and $5 million to settle their own lawsuits. Another large company was forced to pay upward of $36 million in 2004 to settle a discrimination case.

There is yet another myth that business owners think general coverage will protect them from discrimination lawsuits. However, it will not protect them. Workers’ compensation, business owner policies, professional liability policies and general liability policies sometimes exclude liability from lawsuits about discrimination.

Although business owners can take a variety of non-insurance precautions, EPLI is the only option for full protection against the costs of discrimination lawsuits. With an EPLI policy, business owners will be protected from lawsuits stemming from discrimination, sexual harassment, breach of employment contract, wrongful termination, failure to promote or employ, negligent evaluation, deprivation of career opportunity, wrongful discipline, mismanagement of employee benefits and wrongful infliction of emotional distress. To learn more about this type of insurance, discuss concerns with an agent.

About Brian Hendricks

Brian Hendricks is the President of Fidelity Insurance Group. Brian started Fidelity in 2003 with 0 clients. Today Fidelity Insurance Group is a Premier Independent Insurance Agency in Florida with over 3,000 families and businesses insured. Brian currently serves on advisory boards for 2 of the largest property insurance companies in Florida. Knowlege, Integrity, and Committment are his and his agency's guiding principles.
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