High EPL risk continues; SFM expands coverage
The volume of employment practice charges against employers that surged to record highs nationally in 2008 continued in 2009.
Small business owners, however, remain largely unprotected, studies show.
SFM, meanwhile, has enhanced its coverage at no additional charge. In addition to defense costs and liability damages, SFM's basic employment practices liability coverage now includes punitive damages to the full extent permitted by state law.
Most states—including Wisconsin, Iowa, Nebraska and South Dakota—allow punitive damages to be an insurable exposure. However, some states, including Minnesota, have enacted laws excluding certain types of punitive damages from insurability.
SFM's expanded coverage is part of an EPL package designed especially for small businesses and available as an endorsement to the SFM workers' compensation policy. Agents benefit from reduced E&O exposures.
Growing need for EPL coverage
Nationally, charges of employer retaliation are escalating faster than other charges, rising 26 percent in 2009 over 2007, according to data by the U.S. Equal Employment Opportunity Commission.
Charges of disability discrimination, which rose 10 percent in 2008, rose an additional 11 percent in 2009, for a 21 percent increase over the last two years.
Charges of employer retaliation narrowly surpassed race discrimination as the most frequent charge against employers in 2009.
New laws are adding new dimensions to the growing risk of employment practices lawsuits.
Last year, the federal Lilly Ledbetter Fair Pay Act was enacted, significant changes to the federal Americans With Disabilities Act took effect, and the new Genetic Information Nondiscrimination Act took effect, the latter having implications for things like employment decisions involving persons with dispositions to particular diseases.
Looking ahead, Congress has before it some 30 legislative proposals crossing nearly all aspects of the employer-employee relationship. Given the political landscape, it is likely that additional significant changes in employment law may be passed during this administration.
Market opportunities
Despite the growing risk, small employers remain largely unprotected.
Only 1.2 percent of small businesses nationally are insured against the risk of employment practices lawsuits, according to a recent survey by Hartford Steam Boiler Insurance Co., with whom SFM has partnered to make EPL coverage available. Of those that lack coverage, 43 percent said they did not know the coverage was available.
Yet more than half of employment practices lawsuits are filed against small businesses, whose vulnerabilities may generally be due to lack of HR professionals, lack of carefully developed employment practices, and less awareness of risk management. Most lawsuits are found to be meritless, according to HSB, but the cost—mostly for legal defense—typically runs $22,000 to $40,000 and can be devastating for a small firm.
EPL through SAM
Combining EPL coverage with workers' compensation under SFM provides special advantages. For instance, when an employee files a claim, whether for workers' compensation or employment discrimination, the two risks can easily interconnect. SFM's expertise will help the employer anticipate and manage a broader range of potential HR-related issues, producing lower overall cost to the employer.
Updated sales resources
SFM's sales materials have been updated with information on the inclusion of punitive damages.
- EPL quote. Take advantage of the EPL quote that SFM sends to you as part of the workers’ compensation policy renewal for small business accounts. The quote includes basic talking points on EPL.
- EPL sales sheet. This is a more extensive one-page walk-through piece you can use to discuss EPL with your client. Download or order copies through SFM's Resource Catalog.
- EPL agent product guide. A detailed guide to SFM’s basic EPL package, optional limits, deductibles and coverages, plus an overview of marketing opportunities for agents. Download, order copies through SFM's Resource Catalog, or read the online version.
Use SAM
You can easily add the EPL endorsement to the workers’ compensation policy when you submit business online through SFM Application Manager.
Related content
- Hartford Steam Boiler study: Video by A.M. Best
- "Employment Practices Liability awarenss lacking for some small business owners" insurancenewsnet news release
- "Job bias charges approach record high:" EEOC news release
- "Association discrimination claims rise:" Legal Update
The author is a Minnesota panel attorney for Hartford Steam Boiler, SFM's insuring partner for EPL coverage