When Worker Compensation Coverage Isn’t Enough

You have Worker Compensation coverage for your business and you feel confident that you are covered properly. It is the law to have this coverage even if you only have one part-time employee. You are meeting the law requirements and have you/your business covered in the event an employee is injured on the job.

Sara worked for you for years. You considered her part of your company family, almost like a daughter. However, business is slow and you have to cut back her hours because the work is not there. Suddenly you receive in the mail a letter from an attorney representing Sara. Sara is claiming you did not give her breaks as mandated by law, she worked hours over her shift and was not paid overtime and you have cut her hours due to discrimination!

You know this is not true so you turn the claim into your Worker Compensation carrier. This claim is not covered because there was no injury at work. So you then think, ‘I will turn it over to my General Liability Company.” Your Business Owners Policy has liability coverage. Surely it is covered there, but then you discover, the liability coverage on this policy EXCLUDES employees!

Unfortunately, most business owners do not discover this until there is a claim. Is there a policy that will cover the business owner in this situation? Yes. It is called Employment Practices Liability Coverage (EPLI). EPLI insurance covers losses that would not be covered by Comprehensive General Liability policies. It is a coverage that can be added to your General Liability policy as an endorsement or a separate policy can be issued for this coverage.

What does EPLI cover?

• 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 benefits plans

“Employment claims are very frequent and chances are that every employer will face them as part of doing business at one or more times during the existence of its business,” states Mukesh Advani who practices in the areas of employment law. “Small and medium sized businesses are often the most exposed to this liability because they typically don’t have proper human resources departments to deal with employment-related issues on an ongoing basis to avoid or minimize such claims.”

Your company does not even have to do anything wrong to be sued but the business owner still has to defend himself and this defense can cost hundreds of thousands of dollars. Frivolous lawsuits fill our courtrooms. It is important to protect yourself. EPLI coverage covers defense expenses, compensatory monetary awards, remedial awards, judgments and pre- and post judgment interest.

An example of what would be covered is indicated above in Sara’s compliant. I am seeing a lot of wrongful termination claims being filled by dry cleaner employees. Los Angeles seems to be a hot bed of worker compensation claims. Insurance companies are retaliating by either not writing coverage in the area or increasing the rates.

Contact your Insurance Broker/Agent to obtain a quote on this important coverage. Remember, however, you cannot obtain coverage for criminal, fraudulent or malicious acts, for damages for which you have assumed liability. If you have violated certain Federal or State laws, there would be no coverage for that.

Don’t wait until you receive that letter in the mail. Cover yourself now