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Insurance for employee lawsuits

Unhappy_newspaper Wouldn’t it be great to see your company’s name on the front page of the newspaper? Or on the evening news?

Not if it was because a former employee was suing you.

Everyone thinks it’ll never happen to them. But are you and your business protected if you’re sued by a former employee?

Many business owners don’t realize the benefits that insurance can provide them. I often come across insurance policies that are very generic and essentially do not provide much coverage beyond general liability.

This concerns me, especially now during the economic crisis that we are facing. One lawsuit can easily ruin a business even during good economic times. Imagine what it can do when times are tough.

While I understand the concern to not be over insured, I do feel it is important to be adequately insured.

A coverage that is available now and that can help a business owner in a situation like this is Employment Practices Liability Insurance (EPLI).

Recognizing that smaller companies need this kind of protection, some insurers provide this coverage as an endorsement to their businessowners policy (BOP). The coverage limit is typically minimal so, depending on your company size, a separate EPLI policy may need to be purchased.

EPLI provides protection against many kinds of employee lawsuits, including claims of:

  • Sexual harassment
  • Discrimination
  • Wrongful termination
  • Breach of employment contract
  • Negligent evaluation
  • Failure to employ or promote
  • Wrongful discipline
  • Deprivation of career opportunity
  • Wrongful infliction of emotional distress
  • Mismanagement of employee benefit plans

In addition to paying a judgment for which the insured is liable, it also provides for legal defense costs, which can be substantial even where there has been no wrongdoing. This is a major benefit of this coverage as the cost of defense can sometimes be the largest cost factor of the claim.

Are you insured in case of lawsuit from a former employee?

If your answer is “I don’t know,” you might want to take a look at your policy or contact your agent to find out. And be sure you have an attorney who understands business law.

In this case the benefits can outweigh the costs.

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Comments

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