Category Archives: Employment Practices Liability Insurance

Does My Business Need Management Liability?

GenLiability_dt_21134708Whether you are a public company or a private corporation, management liability is an important policy to have in place as part of your overall insurance program.

So, what constitutes management liability?
This is a policy which protects an entity, “the company”, its directors and its officers, its shareholders, if publicly held, and its assets from a variety of claims. The company is protected against claims alleging mismanagement and the directors and officers are protected against claims resulting from decisions they make. More importantly, the assets of the company as well as the board members, personally, are protected in cases of civil suits brought about by potential litigants.

Another component of Management Liability is Fiduciary liability which protects against claims alleging mismanagement of employee benefit plans.

Other inclusions which are often found in management policies include employment practices liability. This covers suits brought about by employees, independent contractors and/or third parties alleging wrongful acts, such as discrimination, mental anguish, harassment, and an assortment of workplace difficulties which can, in some cases, even include “bullying.”

Most important, however, is the defense provided by such policies, since we all know that even if allegations are proven to be false or fraudulent, the cost of defense can impact heavily upon a company’s bottom line. Some carriers include defense costs within the limits of liability and some provide for defense costs outside the limit. Given the choice, you would probably want to opt for the latter.

Deductibles can range from $5,000 to $50,000 and the higher the deductible, the less costly the policy.

If you have any doubt about the necessity of having such coverage in place, just take a look at some of the claims resulting from lay-offs, unlawful termination, sexual harassment, whistle-blowing, etc.

When asked to join a Board of Directors, the first question you should ask is what type of insurance does the company have in place to protect your interests? You are sure to be glad you did should a claim be brought during your tenure on the board.

– Karen Skoler, CPCU

Is Your Business In Danger Without EPL Insurance?

EPLINo smart business owner would ever think of closing down for the day, turning off the lights and leaving with the front door wide open hoping that nobody would come in to steal their assets while they are gone. However, that is the exact situation a business is in when they do not have Employment Practices Liability (EPL) insurance. A business without this coverage has a huge hole or opening in their insurance protection portfolio!

What is EPL insurance?

EPL insurance protects businesses and individuals against losses arising from employment practice disputes involving current and former employees. Common claims include discrimination, sexual harassment, workplace harassment, wrongful termination, failure to promote, invasion of privacy, negligent evaluation, and wrongful discipline, to name just a few. Did you know that your business is at risk of an employment claim from the moment you interview a prospective employee? For example, if you decide, for whatever reason, not to hire the prospect, that individual could allege some sort of discrimination and bring up a statement or a question which arose during the interview process.

As expected, large corporations typically have substantial EPL insurance in place. However, small businesses usually don’t have this coverage and are often the most vulnerable to employment claims. That’s because they usually lack a company handbook, a legal department, or even an HR Department that would be responsible for hiring, disciplining, or terminating employees in strict compliance with all local, state, and Federal laws. An employee bringing an employment case has a 75% chance of winning with an average damage award of $388,128. However, even if your employee loses, it is not uncommon for legal fees associated with a lawsuit to exceed $250,000. When you spend that much on legal fees, it is hard to feel like you have won. So how can you, as a small business owner, reduce your risk of these claims especially given the economic climate we are in today?

1. Prepare an employee handbook detailing your business’ employment policies and procedures for all aspects of employment including procedures for disciplining or terminating an employee. Make sure that each employee is given a copy of the handbook, reads it, and signs a statement acknowledging their receipt of this handbook.

2. Conduct periodic performance evaluations of employees and note the results in the employee’s file.

3. Create an effective record-keeping system to document employee issues as they arise and including steps that were taken to resolve any issues.

4. Create a job description for each position that defines expectations of skills and performance.

5. Institute a zero tolerance policy regarding discrimination, substance abuse, and any form of harassment in the workplace. Also make sure you have an “open door” policy in which employees can report infractions without fear of retaliation.

6. Review your loss exposures with your insurance agent and purchase the right amount of EPL insurance for your business.

While these steps can’t completely eliminate the risk, they can certainly reduce the risk and help you to better defend your business if and when a lawsuit is filed by one of your employees. This is why it is so critical to speak with your insurance agent and fill in this gap in coverage by purchasing an Employment Practices Liability Insurance Policy.

– Ray Alvarez