Get EPLI Coverage Today

Steven Cesare, Ph.D.

A business owner from Pennsylvania called me the other day to complain about the increasingly litigious nature of human resources. Apparently, over the past couple of months, several employees have threatened “to get a lawyer” because they felt they were being discriminated against in some way, shape, or form. A common refrain that I hear about on a weekly basis.

Give the reality of the situation, I was unable to calm the owner. However, given the rabid nature of employees nationwide to “lawyer up,” I urgently recommended that he contact his insurance broker immediately and begin the process to secure Employment Practices Liability Insurance (EPLI) coverage for his company.

I told him that EPLI provides coverage against various types of employment-related claims including discrimination, harassment, retaliation, emotional distress, negligent evaluation, wrongful deprivation of career opportunities, mental anguish, FMLA, etc., and in some cases FLSA issues. Completely unaware of this service, I rhetorically asked the owner if he could imagine operating his company without a vehicle insurance policy, general liability policy, or workers’ compensation policy. Of course, he replied “no” very quickly. Without those aforementioned insurance policies as part of his company portfolio, the owner would be responsible for all payments to their related claims out of his own pocket.

The same holds true for EPLI. Imagine an employee hiring a lawyer to sue the employer for discrimination, with the employer’s lawyer billing at an average rate of $450/hour. I’m not making that number up. Without EPLI coverage, the owner would quickly be staring at tens of thousands of dollars in legal fees alone; let alone potential fines, penalties, and administrative costs.

In support of my recommendation, I told the owner about another business owner, from the state of Washington, who called me with a similar complaint several months earlier. Naturally, I suggested his company purchase EPLI. In response, he stated he did not have $6,000 for one million dollars of coverage and thought EPLI was an unnecessary cost. Two months later, he called me back to say his company was sued by a former employee for $505,000.

I completely understand this is yet another sunken cost for companies to absorb. However, given the times in which we live, prudent business owners have staked out a defensive legal posture to protect them and their company assets against the inevitable lawsuit.

With that proactive thought in mind, I strongly recommend that you contact your insurance broker today and solicit multiple EPLI proposals for your company. The annual premium is usually based on a percentage of company payroll, previous lawsuit history, and possession of basic human resources programs (e.g., employee handbook, policies and procedures, legal compliance).

If you have any questions or comments about this topic or anything else related to human resources, simply call me at (760) 685-3800.