Overview

Employment Practices Liability Insurance (EPL) provides defense and indemnity coverage for claims arising out of the employment relationship. Although in existence for over ten years, insurance coverage for employment claims was costly and unaffordable for most small to mid size companies. Over the past several years, however, coverage has become reasonably priced despite the fact that employment claims continue to rise, and the cost of litigating employment disputes has become more expensive. Today, litigation of an average discrimination case through trial could cost upwards of $250,000.

If you are unsure about the need for EPL coverage, here are some unsettling facts from a recent survey:

• More than 30 million employment-related cases have been filed in U.S. courts, according to the Department of Labor 2000 Report
• According to the DOJ, in the federal courts alone, between 1990 and 1998, cases tripled in number from 8,413 to 23,735
• The EEOC reports that they brought almost 80,000 charges against employers during 2000
• Of particular concern is the rise in class action cases, which grew from 65 in 1996 to 85 in 1998, this according to the DOJ
• The median employment award more than doubled in the five years between 1993 ($62,000) and 1998 ($137,000), also according to the DOJ
• The most recent Tillinghast-Towers Perrin survey report, employment cases against company executives grew 6.6% in one year from $287,000 in 1998 to $306,000 in 1999
• Several large claims caught the attention of the public when announced during recent years, including Voice of America at $508 million; Texaco at $176 million; Coca-Cola $192.5 million; State Farm $157 million; Shoney's $105 million; Home Depot $104.5 million; and Mitsubishi $54.4 million
• According to the DOJ, the percentage of employment-related cases that exceeded $10 million jumped from 1.4% in 1990 to 10.6% in 1998

Todays employers are confronted with a myriad of federal, state and local laws each time an employment decision is made. Such exposures will continue to expose unprotected employers to greater risk. Employment Practices insurance coverage should be considered as a vehicle to manage such risk. At a minimum, a company's Executive Committee should be made aware of the availability and cost of coverage. Although competent counsel and/or consultants can provide the most updated risk management techniques to minimize Employment Practices exposure, the potential of a frivolous or non-meritorious claim is still an unfortunate reality.