Employment practices liability insurance offers companies protection against claims that the legal rights of company employees have been violated. This policy offers companies protection against lawsuits filed by its employees, including sexual harassment, wrongful infliction of emotional distress, failure to employ or promote, breach of employment contract, discrimination based on age, sex, race, or disability, wrongful termination, negligent evaluation, wrongful discipline, deprivation of career opportunity, and unfair hiring practices.
Policy Overview
The cost of employment practices liability insurance policy depends on the size and type of your company, the number of employees, the risk factors involved, and the history of the company being sued over employment practices. The policy will compensate the company for the costs incurred while defending against a lawsuit in court, including the judgement and settlement. It usually covers all the legal costs regardless of whether the company wins or loses the suit. The policy not only covers the company, but also its directors, partners, and officers. Employers should try to obtain the broadest coverage available, making it possible for part time, temporary, leased, seasonal employees and independent contractors to be covered too. It is common for these policies to offer severability, where an innocent insured will not lose his insurance when another insured acted in such a way as to be excluded from the coverage. The employment practices liability insurance agencies allow the employer to select their own defence counsel. This policy has drawbacks, since insurance agencies may refuse to pay punitive damage claims. The claim that the employer seeks coverage for must take place within the period of the policy.
The current trend to sue employers has resulted in corporations countering them by drafting policies that forbid discrimination and harassment, training personnel to reinforce the policies, making sure that the employees’ complaints are heard and that appropriate action is taken. This is a serious matter as employment disputes make up over 30 percent of all civil litigations. The current federal and state employment laws have favoured employees, making them seek rights of recovery. Therefore the employer will benefit if the policy applies on a per claim basis as, if the business faces a class act lawsuit, it will just have to pay one deductible for the entire claim. The business benefits if it obtains a cap on the total amount of the deductible to be paid under the Employment practices liability insurance policy.
Make sure you investigate the need for the policy thoroughly, choose a good carrier, are able to choose your attorneys in case of a lawsuit, and maintain control over settlements if any. There are firms that offer their services and products to help run a business smoothly, making the work of new entrepreneurs easier.
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site smallbusinessconsultingdotcom