The Importance of Employment Practices Liability Insurance (EPLI)
Employment practices liability insurance (EPLI) is a crucial form of coverage that provides protection for companies and employers against claims made by employees alleging discrimination, harassment, wrongful termination, or other workplace-related issues.
The Rise of EPLI Claims: Understanding the Trends and Statistics
According to a report by insurance provider Hiscox, the number of EPLI claims has risen steadily over the years, with the average cost of a single claim in the United States reaching $160,000 in 2019. Discrimination claims are the most common type of EPLI claim, accounting for 34% of all claims filed in 2020, according to the Equal Employment Opportunity Commission (EEOC).
The Cost of EPLI Coverage: Is It Worth the Investment?
EPLI coverage is relatively affordable, with the average cost for small businesses in the United States being around $2,000 per year, according to the National Federation of Independent Business.
“ Employment Practices Liability Insurance (EPLI) claims are, on average, amongst the most expensive claims to settle. In addition, they vary as there are numerous triggers, this differs from say, an auto collision or home fire claim. According to the Equal Employment Opportunity Commission (EEOC), it recorded 72,675 charges of workplace discrimination in the fiscal year 2019 alone, and the average cost of defending and settling an employee claim was approximately $160,000. Claims and cost are only rising in 2020. According to industry experts at AmTrust Financial, retaliation, sexual harassment, gig worker classification, the gender pay gap, and medical marijuana usage were among the top trending EPLI litigation cases. In fact more than half of all EEOC claims filed in 2020 involved claims of retaliation. It only makes sense to consider purchasing EPLI coverage even if your business has 2-3 employees and in many cases, even if you only have one employee.”
-Mac Chavarria, Managing Partner/Producer Basin Pacific Insurance – Bothell, Washington.
Small Businesses at Risk: Vulnerabilities and Risks for Smaller Companies
Small businesses are particularly vulnerable to these claims, with around 41% of EPLI claims filed against businesses with less than 100 employees, according to the National Association of Insurance Commissioners.
Directors and Officers (D&O) Insurance: Additional Protection for Executives and Directors
It’s also worth mentioning that while EPLI provides coverage for employee claims against a company, directors and officers (D&O) insurance covers claims made against a company’s executives and directors for wrongful acts, such as breaches of fiduciary duty or mismanagement. D&O insurance can provide protection for companies in the event of shareholder lawsuits or other legal actions against top-level executives.
Conclusion: Why EPLI and D&O Insurance are Critical Investments for Businesses
In conclusion, EPLI is an important form of insurance coverage that can protect businesses from the financial and reputational risks associated with employment-related claims. Small businesses are particularly vulnerable to these types of claims, but the cost of EPLI coverage is relatively low compared to the potential cost of a lawsuit. Additionally, companies may want to consider D&O insurance to protect their executives and directors from potential legal action. By investing in these forms of coverage, businesses can mitigate their risks and protect their assets.
Should you have any questions regarding your current coverage or want further information on business insurance offered by Basin Pacific Insurance, click here, or contact us at (509) 765-4785.
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