Those who keep up with the news are likely aware of several recent high-profile cases involving claims of sexual harassment, discrimination, and wrongful termination made by employees against their employers. Businesses of all types are susceptible to this type of trouble. In today’s litigious environment, all employers would be wise to consider employment practices liability coverage to address exposures of this nature.
Common Employment Practices Complaints
While this coverage addresses other employment-related offenses, the most common sources of employment practices complaints consist of the following:
Sexual Harassment – Unwelcome sexual advances, requests for sexual favors, or verbal contact or physical contact or behavior of a sexual nature that is implied or stated to be a condition of employment or that interferes with an individual’s work performance by creating a hostile, offensive, or intimidating environment.
Discrimination – Termination of an employment relationship, demotion, failure or refusal to hire or promote, differential payment of wages and/or benefits, or other employment actions motivated in whole or in part by the employee’s color, race, sex, national origin, sexual orientation or preference, age, religion, creed, disability status (as defined by the Americans with Disabilities Act), or pregnancy status.
Wrongful Termination – Termination of an employment relationship in a manner which is in violation of any law or in breach of any employment agreement.
What Do Business Owners Need to Know?
Due to the complexity of this coverage, working with an insurance agent is strongly advised. Employment practices liability coverage may be incorporated into a package policy or issued as a stand-alone policy, and the number of employees in an organization is a common rating factor used to determine premium. To mitigate these exposures, documented annual employee training is imperative.
Key Coverage Features
The following key features should be discussed between the insurance agent and client:
Who is insured?
- What are the limits of insurance?
- Are claim expenses included in the limit?
- Is there an extended reporting period in which to file a claim?
In addition, it is critical to determine whether the policy includes prior acts coverage, which addresses claims alleging a pattern of wrongdoing spanning more than one year, as well as whether the coverage is written on a claims made or occurrence basis. Each of these options includes benefits and drawbacks that can have a lasting impact on your financial well-being in the event of a claim or lawsuit.
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