Today’s economy has forced every business, large and small, to consider ways to decrease their cost of doing business.  Reducing payroll in many cases is the only way to stay in business.

When this is done and employees are laid off, the potential of employee claims of discrimination is greatly increased, especially by the older higher paid employees.  Finding a new job in today’s economy is difficult and this also increases potential discrimination suits by laid off employees. 

Discrimination litigation is expensive. A recent Insurance trade publication reported a Chubb survey that stated the average cost including judgments, settlements, fines and legal fees of an EPL related event as $63,114 and it reported actual costs from $45,000 to $600,000. The same survey indicated that 63% of companies do not currently have Employment Practices Liability Insurance. 

A recent article in Business Insurance, titled Age Bias Charges Surge as Firms Shed Workers, confirmed this and stated, “as layoffs have abounded during the recession, employers should brace themselves for more age discrimination lawsuits as many older workers’ who have been laid off have the attitude that they have little to lose by filing a claim.”

The Equal Employment Opportunity Commission (EEOC) reported age discrimination charges filed by employees increased 28.7% in 2008 from fiscal 2007. The cumulative number of 2009 layoffs in the U.S. from January through August totals 1.07 million and the numbers continue to grow.  Even without increasing layoffs, EPL litigation is expected to increase for the following reasons. U.S Supreme Court decisions have widened employee liability as have our California courts.  Our current administration in Washington has a strong pro labor position. These factors are making it easier for employees to bring successful discrimination claims.

In addition to giving your clients protection in case of an employee claim, most EPL carriers offer a “hot line” service, which can help prevent claims.  This service gives your client advice on how to handle a potential employee problem.  Most small and medium sized employers do not have the resources to have a separate Human Resource Department and this service alone can be worth the premium cost of an EPLI policy.

You now have the opportunity to make additional commission as well as protecting yourself from an E&O claim by quoting Employment Practices Liability Insurance (EPLI) to every commercial account you insure.  It also provides a good talking point for new commercial accounts you are now working on if they don’t currently have EPLI.  Failure to provide coverage is one of the leading causes of claims against insurance agents and brokers and by proposing EPLI, you can eliminate this exposure.  If they decide not to purchase this very important coverage, have your insureds acknowledge your recommendation and their decision not to carry EPLI coverage.