With rapidly increasing numbers of employees filing lawsuits against their employers, even the smallest businesses cannot afford to lack coverage by Employee Practice Liability Insurance (EPLI). Providing financial protection against sexual harassment, wrongful termination/discipline, age/sex discrimination, inflicting undue emotional distress and a host of other accusations, EPLI policies reimburse companies for expenses associated with hiring defense attorneys, court fees and possible settlements, whether or not an employer wins or loses their case against an employee. However, most EPLI policies do not compensate employers for criminal/civil fines or punitive damages ordered by the court.
5 Benefits of EPLI Every Employer Should Know
Some EPLI policies offer "catch-all" categories that provide claims coverage of certain discriminations not described by federal statues, such as sexual orientation. This type of EPLI policy will list categories of classes protected by law but include the phrase "as well as other protected classes" to ensure broader coverage.
EPLI "occurrence" policies obligate insurance companies to reimburse employers for claims emerging during any given policy period, regardless of when the claim is initially reported. In other words, EPLI occurrence policies cover claims made months or years after the alleged incident took place.
Claims-made EPLI policies protect employers against lawsuits brought by employees while the EPLI policy is active and in force. Typically, claims-made policies offer coverage for incidents/acts happening before the policy period. In insurance terms, any act occurring prior to a policy period is referred to as a "prior act coverage".
Comprehensive EPLI policies clearly identify how coverage is triggered. These events include but are not limited to demand letters, administrative lawsuits or administrative complaints. Incontrovertibly identifying coverage triggers eliminates issues with coverage and allows employers to immediately pinpoint the moment coverage began.
Employers particularly concerned about employees filing lawsuits against them may request an EPLI policy contain provisions for covering oral demands when there is proof of an oral demand.
How Employers Can Decrease Their Employment Liability
In addition to obtaining EPLI, employers may want to consider the following:
Developing meticulous recruitment/hiring methods that embrace "zero tolerance" approaches to harassment and discrimination.
Adopting employee orientation processes that are rigorous, exhaustive and straightforward.
Standardizing termination and disciplinary procedures to phase out inconsistencies within these areas.
Ensuring records remain consistently accurate throughout all stages of the hiring process.
Educating recruiters/supervisors on laws regarding what and what is not allowed to be asked or discussed during interviews. Definite, off-limit topics include inquiring about a potential employee's age, ethnicity, religion and nationality.
Implementing appropriate communication methods that facilitate filing of grievances by employees.
Liberally posting copies of standardized company policies in conspicuous areas of the workplace. Employers should also provide free copies of employee handbooks containing these policies.
Regularly holding meetings with employees to explain what steps they need to take if they feel they are being discriminated against or harassed.
Documenting all occurrences of employee disputes and detailing how your business is attempting to dutifully resolve the disputes.
Although companies today should have some type of EPLI coverage protecting their assets, employers who remain proactive towards preventing their company from dealing with employee-based lawsuits is essential to keeping their EPLI policy rates as low and affordable as possible.
Beimdiek Insurance Agency, Inc. is a family owned company with about 30 employees that is based in Carthage, MO with locations in Joplin, MO and Neosho MO as well. We offer a full range of brokerage services for personal, commercial, trucking, and employee benefits. At Beimdiek Insurance Agency, Inc., we are focused on building long-term relationships with our clients, employees, and the communities we serve. For more information, visit www.beimdiek.com.