There are many kinds of business insurance, and one that is sometimes overlooked is employment practices liability (EPL) coverage. What is it, and does your company need it?

First, let’s take a look at what EPL does. EPL covers exactly what its names says: employment practices. Specifically, here’s a list of lawsuits covered by EPL.

  • Defamation
  • Depravation of career opportunity
  • Discrimination
  • Failure to promote
  • Invasion of privacy
  • Negligent evaluation
  • Retaliation
  • Sexual harassment
  • Wrongful termination

Now that you know what it is, let’s consider whether you need it or not.

Increasing Litigation

Consider the fact that litigation against employers is increasing. It’s expected that 60% of firms will be sued by an employee at the cost of hundreds of thousands of dollars in legal fees alone.

Costs Will Kill You

Many businesses wouldn’t be able to survive a substantive lawsuit being filed against them by an employee. Let’s look at the costs. Administrative costs will be around $5,000. On average, you can settle for between $20,000 and $70,000, but if you end up going to trial you could be looking at anywhere from $100,000 to $250,000. Some businesses can take that kind of hit, but it’ll hurt regardless.

Small Business, Bigger Risk

Smaller businesses don’t tend to have a lot invested in their human resources, meaning they might not always follow best practices to avoid a lawsuit. At the same time, it’s unlikely a small business will have a legal division or even a law firm on retainer. When you combine those factors, it’s a powder keg just waiting to be lit by the spark of a lawsuit.

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