TOP 10 Reasons Why EPLI Insurance is a Must For Small Businesses

In today’s business world, the threat of being sued is an everyday reality. The dangers are even more real if you don’t have a dedicated human resources (HR) department or formal training to deal with the myriad of laws, rules and regulations that exist to protect employee rights. In a bad economy statistics show that employment lawsuits increase dramatically. One disgruntled worker can put your entire business at risk if he brings a lawsuit or discrimination charge against you — whether valid or not. The cost to defend the allegations alone can put you out of business, not to mention the price you’ll have to pay if you lose.

To help mitigate your risks, Employment Practices Liability Insurance (EPLI) has become a major element of small businesses’ insurance needs. EPLI generally covers your company for: wrongful termination, sexual harassment, discrimination and workplace torts.

Here are the top ten reasons EPLI is a must for small businesses:

  1. Employee lawsuits and discrimination charges are excluded under standard general liability policies
  2. Every employer, large or small, can be the target of legal action from past, present, and prospective employees
  3. Employee lawsuits are 1,000 times more likely to occur than a fire
  4. Employees file over 90,000 charges per year with the U.S. Equal Employment Opportunity Commission
  5. Employees can easily file lawsuits at no cost, with no risk to them
  6. Employees win 70% of jury trials
  7. Many jury awards can exceed $1,000,000
  8. Employer defense costs can easily exceed $200,000
  9. Owners’, directors’ and officers’ personal assets can be at risk
  10. Midsize businesses with 15 to 250 employees are sued more frequently than larger businesses, often due to:
    • Inadequate HR/employment law management;
    • Ineffective loss prevention programs; and
    • Valuable unprotected assets to target.

A Professional Employer Organization (PEO) can help you navigate through many of the HR issues that prompt suits and charges. While there is nothing that will guarantee that you won’t be sued by a disgruntled employee, a PEO can go a long way in decreasing the likelihood. The PEO has a staff of trained and certified HR professionals who will guide you through employee relations and other compliance issues thereby greatly reducing your risk.

Unfortunately, even with proper guidance, employees are free to sue and that is where EPLI comes in to provide a defense and indemnification for covered matters. A complete PEO program generally offers some kind of EPLI coverage as either part of its package (see Alcott HR Group’s Constellation Package) or as an add-on. These days, being without a solid HR staff and/or EPLI is simply not a good idea.

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