Business owners are well aware of
how expensive defending themselves in a lawsuit can be, and that the proper insurance can lessen the burden. What they may not know is that more
than half of all corporate claims are
brought by employees, making Employment Practices Liability Insurance (EPLI)
a specialized form of coverage that’s worth
investigating.
Alfonso Galvez, commercial insurance
broker with Westland Insurance Brokers,
points out that EPLI is often an afterthought for employers.
“Generally, people are so busy building
their business, they lose sight,” says
Galvez, a 20-year veteran of commercial
insurance. “People are concerned about
maybe the theft of a computer or a fire that
might happen in their facility. But one of
the most common claims that can occur
would be an employee-related claim.”
Smart Business spoke to Galvez about
the role EPLI plays in protecting a company’s assets in the event that it’s the target
of a work-related lawsuit.
What is EPLI and what kinds of claims does
it cover?
It’s specialized insurance coverage that
protects employers against claims in
work-related lawsuits. It includes wrongful termination, harassment and discrimination based on age, race and gender.
There’s also an option to purchase third-party discrimination and harassment
insurance. For instance, in a retail store a
patron may feel like he or she is being discriminated against because of race. Or it
could be a situation where you have a
manufacturing company and perhaps a
vendor pays a visit and the receptionist
harasses that individual. These are examples of third-party claims as opposed to
claims that take place within the work
force of a particular company.
Other employment-related suits that may
be brought against an employer and are
included in this type of policy are breach
of an employment contract, negligent evaluation, wrongful discipline and mismanagement of employee benefit plans.
Who should consider EPLI?
I believe that every company should
have this coverage in force. Companies
that are most vulnerable are generally
small- to mid-size companies. They may
not have either the necessary capital to
defend themselves against an employment-related suit or other resources, such
as a human resources manager who is current with rapidly changing employment
policies.
What kinds of expenses does EPLI cover?
Among the costs that are covered in an
EPLI policy are such things as judgments
that are handed down in court. It also
includes coverage for general expenses to
discover what the alleged claim is or what
occurred. Also included are legal expenses, which — particularly in California —
can rise rapidly.
How does a company assess its risk for
employee-related claims?
It’s determined by the type of company it
is, how many employees it has, and if it’s had any past claims history. It also
depends on whether or not the company
has instituted any kind of employment
policies and procedures. It’s really important that the company have an actual
employee handbook and policy manual to
help reduce the likelihood of a claim.
Does employment law affect EPLI?
Yes, it really does. One of the challenges
that most companies have is trying to stay
current with all the changes in state and
federal employment-related laws. That’s
why it’s especially important to have this
kind of coverage because it adds another
layer of protection in the event something
changes of which a company is not aware.
What else can EPLI coverage provide a company?
One of the newest features of many
Employment Practices Liability policies is
that insurance companies include free
legal hotline assistance. A number of
insurance companies provide a set period
of prescribed time to call a designated law
firm to ask questions about either employment law or a situation that has arisen
within your company.
You can also get what is referred to as
loss-control services. This provides assistance with the information you can
include in your employee handbook and
policy manual. For instance, you would
include information related to zero tolerance in the workplace and state in the
handbook how you would handle a report
of an alleged harassment or discrimination
incident.
Some policies also provide you the
option of choosing your own counsel and
therefore having more control over the
defense and settlement of your claim.
ALFONSO GALVEZ is a commercial insurance broker with
Westland Insurance Brokers. Reach him at (949) 862-3323 or
[email protected].
