In 2018, 65% of all businesses are now buyers of this essential business coverage. It is no longer that is just an employer/employee workplace risk- the risk also extends to third parties that are exposed to your employees and workplace. This includes customers, vendors, delivery persons, visitors, and any others you or your employee comes into contact with in a corporate capacity.
A key finding from a recent survey of private companies was “the fact that more than half the respondents listed attracting and retaining quality employees as their top employment challenge. That being the case, it behooves companies to pay special attention to the area of Employment Practices Liability (EPLI), since fostering a respectful workplace — and addressing and resolving any situations that run counter to that cultural goal — will help them meet the challenge of attracting and keeping needed talent.”
In addition to this, claims covered under the EPLI policy represent a majority of the total reasons for claims under a combined management liability policy. These include claims relating to harassment, bullying, retaliation, and discrimination.
On an interesting note, this same survey took a closer look at the remaining 35% of those who continue to NOT purchase EPLI. The respondents listed these reasons as the top drivers of their choice to go uninsured:
• 37% had not experienced related incidents in the past
• 30% believe claims are covered by other business insurance (e.g., general liability or Business Owner’s Policy)
• 26% were not required to purchase (by contract or law)
• 24% said they “Don’t believe we need because business is privately held”
• 22% have company policies or procedures in place to prevent exposures
• 17% don’t believe there is a need because the business is family run
• 13% are not aware of this insurance coverage
• 7% said that coverage is not affordable/funding is not available
When faced with these reasons, you should present these counter arguments:
1. Prior claim experience is not an indicator of future claim risk. In addition, it is more difficult to get the coverage after a claim, and more expensive, than it would be had coverage already been in place at the time of a claim.
2. EPLI claims are unique to the EPLI policy. All other policies contain an exclusion relating to any “employment-related matters”. Since EPLI is not usually required to be purchased by law or contract, businesses should not use that as a marker for buying coverage.
3. Being either privately held or family owned has no bearing on the exposure to EPLI claims. Businesses should not confuse the risk to be limited to employee vs. employer claims. Third party claims account for many of the actions brought against businesses, therefore, the risk is an external as it is internal.
4. Having good policies and procedures in place is what makes you an excellent insured, but it doesn’t make you self-insurable. EPLI claims are costly, and they can occur against businesses with good policies and procedures in place just as they can against those who do not. It only takes a single incident to result in a loss, and those costs continue to rise.
5. EPLI is very competitive an affordable in 2018, and average claims are now over $100,000, which is multiples of the cost of a policy. All agents should make every commercial insured aware of this coverage, and for the reasons above, the need to buy this coverage. Pay special attention and concern to the risk of third party claims, and why employers just do not know of their exposure to this risk.
Today’s commercial insured will look at their insurance portfolio as a means of disaster planning. D&O, EPLI, and Cyber Liability insurance coverages are essential to every commercial entity. Rather than being offered or asking if they want a quote, they should be presented with options that make financial sense while being properly educated on their exposures to risk they just may not have seen.
Finally, offering the right protection to your customers will at the same time offer protection for you. A big reason today’s E&O carriers are paying claims is due to the un-insurance or underinsurance of these coverages for their customers. Diligence in understanding these policies and the risk they present to your customer is your best offense and defense simultaneously.