Every business owner thinks, or at least hopes, that everyone who works for him is happy and that they all feel like a family. Maybe they do and maybe they don’t. But no matter how happy they are working for you, nothing stays the same. The best of employer–employee relationships can go downhill because of mistakes, misunderstandings and just plain human emotions. Whatever the reason, when things go bad, an employee could hit you with a lawsuit.
You may think that you know your people and that it won’t happen to you. But the statistics say otherwise. On average, a business in the U.S. with 10 employees or more stands a 12.5% chance of being involved in an employee liability lawsuit at some time. This is the national average. The figure changes dramatically if we look at the situation state wise. In many states the risk of being involved in litigation is higher.California Tops the List
The District of Columbia has an incidence rate of Employment Practices Liability (EPL) litigation that is 32% higher than the national average. In Illinois the figure is 26%, in Alabama 25% and in Mississippi it is 19%. What about California? It stands at the top of place where employee liability lawsuits are most likely with business owners facing a 42% higher chance of being involved in a lawsuit.
With numbers like these, employers in California need to be extra cautious. Having EPL insurance is not enough. The limits on the policy need to be high enough to offer real protection. In federal courts compensatory and punitive damages combined are limited to $300,000. Most states, however, have no such ceiling on the quantum of damages that may be awarded to an employee. If you are a business owner in California and do not have EPL insurance, the danger is obvious. And even if you do have coverage, are you sure that it is enough? It’s important that you talk to your insurance broker ASAP to check on your coverage and discuss the monetary implications of increasing it, should it be required.Insurance Companies Offer Resources for Protection
Many insurance companies are willing to go the extra mile to support their clients and reduce the probability of a lawsuit. A loss in court can cost an insurer a huge amount. Many insurers offer training materials to their clients to help them establish Best Practices in sensitive areas for employer – employee relations such as race, sex, age, disabilities and so on. These inputs can be extremely helpful in prevent lawsuits because the insurance companies that provide this support has avoiding EPL litigation as a primary focus.
Unfortunately, many businesses miss out on both the need for EPL insurance as well as the support that insurers give in avoiding lawsuits. This is because, in smaller organizations, there will typically be one person looking after HR issues. While he or she may be aware of the issues involved in EPL liability, the decision to insurance purchasing is usually done by the head of the company. This operational and communications gap is the kind of thing that allows companies to become liable for massive payouts in EPL cases.
Another problem is that many businesses are under the mistaken impression that their general liability policy covers them against employee lawsuits. It does not.Have you checked your EPL liability coverage lately? Are you protected against that one big lawsuit that could take your company down? Contact Insurance by Allied Brokers by calling 650-328-1000 or by visiting http://www.alliedbrokers.com/.