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Employment Laws Direct Impact Business Owners

September 26, 2017 | Ryan Kagarakis

With summer officially over it’s finally time for the kids to go back to school. This means putting down the video games, getting your back to school supplies, and starting to prepare for Mr. Molinski’s famously difficult math class. In that same vain I wanted to touch on getting back to the basics of employment related claims in the workplace. Employment Practices Liability Insurance (EPLI) is often a misunderstood or unappreciated type of coverage so we wanted to dust off the text books and re-examine why it’s important.

“What are Employment Related Claims?”

Employment related claims are lawsuits or complaints that arise from damages an employee incurs during the course of their employment. Examples of employment claims can be allegations such as (but not limited to):

  • Discrimination
  • Wrongful termination
  • Sexual harassment
  • Wage & Hour Violations
  • Retaliation
  • Inappropriate employee conduct
  • Slander
  • Invasion of privacy, etc.

“Shouldn’t my general liability or workers’ compensation policy cover this?”

Unfortunately, these policies will not cover you for employment related claims. A common assumption is that wrongful termination, discrimination, and the like are covered by your workers’ compensation and/or general liability coverages but upon examination you will find that they are categorically excluded.

“Well, we have a great working environment and have never had any issues”

Lack of evidence of a risk does not mean that there is no risk. It is easy to fall into a pattern of allowing past experiences to dictate future behavior. Just because you have not been involved in a car accident in 10 years doesn’t mean your probability of getting in one today decreases. Insurance works the same way; just because there hasn’t been a claim doesn’t mean the likelihood of one goes down. According to the Equal Employment Opportunity Commission (EEOC) there were a total of 91,503 employment related charges filed in 2016 which is a 17% increase from 2006. In 2016 California alone accounted for 5,870 of those charges (6.4%). 41% of all EPLI claims are brought against smaller employers with 15 to 100 employees.

“What is the Solution?”

To cover wrongful acts arising from the employment process an EPLI policy is needed. This is a separate policy that is specifically designed to cover employment related claims. This is a great coverage and we highly recommend that any type of business consider exploring solutions. All policies however are not created equal and many insurance companies can get away with offering a lower price by excluding commonly reported claims. Here are a few endorsements/exclusions to look out for:

  • Wage & Hour Claims
  • Hammer Clause
  • Defense Costs Limitations
  • Third Party Liability

Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733