What Is Employer's Liability Insurance?
Employer's liability insurance, also referred to as employment practices liability insurance, is a component of workers’ compensation insurance (insurance against workplace injuries and illness), and businesses are required to have both in most states. Without it, businesses are at risk for potential lawsuits filed by employees, vendors and independent contractors. According to Reference for Business, employment-related lawsuits increased by more than 2,000 percent between the years of 1991 and 1994.
Other People Are Reading
-
Sexual Harassment/Discrimination
-
Employers liability insurance protects businesses against sexual harassment claims filed by their employees and business associates. Sexual harassment is described as activities that violate another individually sexually. Behavior that falls under this category can be either physical or verbal and it violates Title VII of the Civil Rights Act of 1964. This law applies to employers with 15 or more employees. The U.S. Equal Employment Opportunity Commission reported that its department received 13,867 complaints of sexual harassment in 2008.
Discrimination on the basis of race, gender, age and handicap is illegal;however it is common in the workplace. ELI reported in 2008 that the largest discrimination settlement obtained by the EEOC was $2.5 million. This landmark case was based on racial inequity. Employer's liability insurance is designed to cover similar cases.
Wrongful Termination/Discipline
-
Disgruntled employees who sue businesses for wrongful termination can cost companies thousands and even millions of dollars in settlements if the business is found at fault. Employer's liability insurance pays settlements for these types of claims.
Even employees who have not been terminated may sue for wrongful discipline. If adverse actions have been taken against an employee for their conduct at work, employees could sue if they feel they have been treated unfairly. Employer's liability insurance provides protection in these incidences.
-
Benefits
-
This insurance pays for defense expenses, judgments, legal costs and settlements for workplace claims whether your company wins or loses lawsuits filed by employees.
Requirements
-
Your business is required by law to post your employer's liability insurance certificate in a place where employees can view it, such as in the cafeteria or lounge room.
Expert Insight
-
You should request to have control over all legal decisions within your employer's liability policy, so you can select the attorney of your choice in case you file a claim. Each policy is different, and you should communicate with your agent to discuss your specific coverage to ensure you are adequately covered.
Warning
-
Most employer's liability policies do not cover punitive damages, civil or criminal penalties. Punitive damages are fines to punish the defendant for their negligent behavior and civil and criminal penalties are fines imposed for violating the law. Both fines are meant to deter the defendant from engaging in similar behavior in the future.
-
References
- FinancialWeb: Employers Liability Insurance: Laws and Restrictions
- Reference for Business: Employment Practices Liability Insurance
- The U.S. Equal Employment Opportunity Commission: Sexual Harassment
- ELI: Landmark Racial Discrimination Settlement Reached
- EANJ: Unfair Discipline in the Workplace Fuels Litigation
Resources
- Photo Credit bisinessman image by Siberia from Fotolia.com
