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 would be
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 that a company is not aware of.
What else can EPLI coverage provide a company?
One of the newest features of many
Employment Practices Liability polices 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].
