Employer's Liability Insurance is a policy that manages claims for work-related injuries or illnesses not covered by workers' compensation. It's a liability insurance that can be combined with workers' compensation to enhance protection against costs linked to workplace incidents.
Employer's Liability insurance protects employers against the financial repercussions of claims arising from employment-related issues. Claims can come from current or former employees, covering various issues like wrongful termination, discrimination, and harassment. This article will explore Employer's Liability Insurance, its coverage, and its critical role for businesses.
Statista states that medical professional liability insurance is crucial, especially for doctors and surgeons who often make life-and-death decisions. In 2018, direct losses from this insurance amounted to $4.51 billion in the United States and Canada.
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What Are Employer Liabilities?
Employer liabilities refer to the legal responsibilities and potential claims employers face when interacting with employees. These liabilities encompass a wide range of issues, from labour laws and employment regulations to ethical and interpersonal matters within the workplace. Employer liabilities can lead to legal disputes and claims that have the potential to harm a business's reputation and financial stability.
In the U.S., fire and explosion-related incidents accounted for 22% of corporate loss claims between July 2013 and July 2018. In Canada, a slightly higher percentage of claims, 23%, were attributed to fire or explosions during the same period. You should be well-informed about these liabilities and work to mitigate potential risks to protect both your employees and the business itself.
Some common sources of employer liabilities include:
- Wage and Hour Claims: Allegations of minimum wage, overtime, and compensation law violations.
- Class Actions: Large group lawsuits covering issues like wage violations, discrimination, harassment, or data breaches.
- FMLA Violations: Claims involving Family and Medical Leave Act breaches, such as denying leave or retaliation.
- Whistle-blower Actions: Employee protection laws when reporting unethical conduct or fraud by the employer or co-workers.
- Data Breaches: Unauthorized access to sensitive information, exposing employers to negligence claims.
- Social Media Issues: Claims arising from online content, including defamation, harassment, or discrimination.
- Alternative Work Arrangements: Liability related to flexible work schedules or locations.
- Discrimination Claims: Allegations of unequal treatment based on protected characteristics.
- Sexual Harassment Claims: Claims regarding unwelcome sexual conduct or advances in the workplace.
- Gender and Sexual Orientation Claims: Discrimination or harassment based on gender identity, sexual orientation, or marital status, including LGBT protection.
Given the multifaceted nature of these liabilities and the potential for legal action, Employer's Liability Insurance plays a crucial role in safeguarding businesses from the financial repercussions associated with employment-related claims.
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What Is Employer Professional Liability Insurance?
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Employer Professional Liability Insurance (EPLI) is a specialized form of insurance that provides coverage to businesses and organizations against the financial risks associated with employment-related claims. As discussed earlier, EPLI policies cover a range of employment practices liability issues and offer coverage for legal defence costs, settlements, and damages.
EPLI differs from other forms of business insurance, such as general liability insurance, which primarily covers bodily injury, property damage, or personal injury claims. Instead, EPLI is tailored specifically to address employment-related claims and their financial consequences.
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What Does an EPLI Policy Cover?
Employment Practices Liability Insurance (EPLI) covers claims like wrongful termination, discrimination, harassment, and retaliation, including defence costs and damages.
Don't assume your company is immune to employment claims. These claims impact businesses of all sizes and industries, causing financial strain and morale issues even before lawsuits. A study from Hiscox reveals that the typical U.S. company has a 10.5% chance of experiencing an employment claim.
EPLI policies typically cover the following areas:
1. Discrimination: Claims of discrimination based on factors such as race, gender, age, religion, or disability are increasingly common. EPLI can help protect businesses when facing such allegations.
2. Harassment: Harassment claims, including sexual harassment, can financially devastate a company. EPLI provides coverage to address these issues.
3. Wrongful Termination: An EPLI policy can help cover legal costs and potential settlements if an employee alleges wrongful termination. According to insurance experts, employee lawsuits surged by around 400% in the past two decades, with wrongful termination cases spiking over 260%.
4. Retaliation: Claims of retaliation often follow other employment-related disputes. EPLI can help mitigate the financial impact of such claims.
Related: How to Prevent Retaliation in the Workplace
5. Invasion of Privacy: In today's digital age, claims related to the invasion of privacy, such as improper handling of personal data, are becoming more frequent. EPLI policies can address these concerns.
6. Defamation: Claims of slander or libel against employees, customers, or competitors can result in significant legal expenses. EPLI can help protect the business against such allegations.
7. Breach of Employment Contract: If an employee alleges a breach of an employment contract, EPLI can help cover the costs associated with resolving the dispute.
8. Wage and Hour Violations: Claims related to violations of wage and hour laws, such as unpaid overtime or wage discrepancies, can be financially burdensome. EPLI can provide coverage for these claims.
9. Negligent Hiring and Supervision: Claims that an employer failed to exercise due diligence in hiring or supervising employees can be covered by EPLI policies.
10. Employment-related Misrepresentation: Allegations that an employer provided false or misleading information to an employee during the hiring process can lead to legal action. EPLI can help address such claims.
It's essential to note that EPLI policies may vary in coverage depending on the insurer and policy terms. Employers should carefully review and tailor their policies to their needs and risks.
Related: Cost of employee health insurance: What you need to know
Why Is Employer's Liability Insurance Essential?
Employer's Liability Insurance is essential for several reasons, including the protection it offers to businesses and organizations in today's complex employment landscape:
1. Risk Mitigation: EPLI helps businesses mitigate the financial risks associated with employment-related claims. With this insurance, employers can confidently address workplace issues without the constant fear of extreme legal costs.
2. Legal Compliance: EPLI encourages employers to adhere to employment laws and regulations. It underscores the importance of creating a safe, fair, and non-discriminatory work environment, which can reduce the likelihood of claims in the first place.
3. Reputation Protection: Employment-related claims can harm a business's reputation, potentially leading to loss of clients, customers, and employee morale. EPLI helps protect a company's image by addressing claims discreetly and professionally.
4. Recruitment and Retention: A company with EPLI coverage may be more attractive to potential employees, as it signals a commitment to fair and ethical employment practices. It can also help retain current employees who value the protection and assurance EPLI provides.
5. Financial Stability: Without EPLI, a costly employment-related claim can have severe financial implications for a business, potentially leading to bankruptcy or closure. EPLI helps ensure financial stability by covering legal expenses and settlements.
6. Peace of Mind: Knowing that an EPLI policy is in place provides peace to business owners and executives, allowing them to focus on growing and managing their company rather than constantly worrying about potential legal disputes.
Related: Employee Life Insurance and why every employer needs to offer it
Conclusion
EPLI shields businesses from various employment claims, like discrimination and wrongful termination. Employer liabilities are common today, making EPLI vital for financial stability and reputation protection. Employer Professional Liability Insurance, customized for these claims, mitigates risks and ensures legal compliance, offering peace of mind. EPLI investment safeguards business interests, employees, and long-term success in today's litigious world.
