Are you covered? The real cost of employment practices liability suits

Thought Leadership on Protecting What You’ve Worked so Hard to Build presented by Jeff Bernard at Rampart Insurance Services.

Are you leaving your business exposed to a costly employee practices liability suit?

As a small business, it won’t take a large claim to make a massive impact on your company’s bottom line, and your general liability policy probably doesn’t cover these incidents. According to The Hiscox Guide to Employee Lawsuits, U.S. companies have an 11.7% chance of having an employee charge filed against them. In some states, that percentage is much higher than the national average because of differences in state employment regulations.

Let’s take a look at how your company might be at risk.

While it’s impossible for you to monitor and know exactly what each employee is doing at all hours of the day, you may still be liable. Imagine if one of your employees has an interaction with another employee that results in a discrimination lawsuit or sexual harassment claimThe potential legal fees alone in this scenario can be overwhelming. 

It’s also important to note that employment practices liability is not just applicable to your current employees. You need to be thinking about your potential future employees as well. If your company interviews a candidate who claims they weren’t hired based on a discriminatory reason, you could be on the hook for a very costly liability case.

According to that same Hiscox Guide to Employee Lawsuits, 19% of employment liability matters in companies with less than 500 employees resulted in an average defense and settlement payment of $125,000. While most of these claims never end up in court, according to the Hiscox Guide, those that do go to trial result in an average judgment of $200,000 plus legal fees, with 25% of cases resulting in damages awarded totaling $500,000 or more.

Can your business handle this kind of a hit? 

My job as an insurance professional is to explore these various scenarios to make sure clients have the appropriate coverage for their companies. Through in-depth analysis, its possible to identify huge coverage gaps missed by other brokers that can leave companies vulnerable to monumental losses.


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