Employment Claims Pose Significant Business Risk

“Fired? Demoted? Unfairly Treated?”  You may have seen similar attention-getting bannerheads in the advertisements of law firms trolling for clients to file employment practices liability (EPL) claims against their employers.  Not surprisingly, in today’s challenging economy, it is one of the fastest growing areas of litigation in the country.  Recent U.S. Equal Employment Opportunity Commission (EEOC) Statistics show a number of notable trends:

Many employers view EPL claims as frivolous and non-meritorious, but statistics show that employer defendants lose approximately 60% of litigated cases. Since 1997, the average EPL case value has gone from $35,000 to $200,000. Even if the case has no merit and the case is ultimately dismissed, the costs of defense can be significant. Reports estimate that the cost of defending a single employment discrimination claim can exceed $100,000. (

Small Employers Also at Risk

At one time, EPL claims were limited to major corporations but this is no longer the case. EPL claims can be directed toward any type of business, from large national corporations to small businesses and non-profit organizations–no one is immune. According to EEOC data, approximately 40% of all EPL claims are filed against small employers with less than 100 employees.

EPL claims are not covered by general liability policies but can be insured by separate policies designed specifically to address employment practices exposures.  Employment Practices Liability Insurance covers the policyholder for employee claims of discrimination, sexual harassment, retaliation, wrongful termination, and violation of whistle blower laws, as well as the costs to defend those allegations.    

In addition to the coverage provided for damages and defense costs, most EPL policies offer resources designed to help the policyholder mitigate or avoid the claim altogether. Carriers recognize that to minimize the exposure to EPL, their policyholders’ managers need to understand and strictly comply with employment law. That is why access to expert consultants, hotlines with employment law attorneys, on-line training and educational articles on HR issues are available from most carriers, free of charge. Some carriers will even reduce the retention on the policy if certain preventive steps (outlined in the policy) are taken by the policyholder.

With the lingering recession and the difficulty that laid off employees are having finding other employment, we expect that EPL claims will only continue to increase–especially with plaintiff attorneys actively on the prowl for clients in yet another area of lucrative litigation.

Are you protected?  Contact an RCM&D Client Executive for information on how to obtain EPL insurance as a risk management tool for your business.