Thursday, October 29, 2015
If you’re a small or medium-sized business with fewer than 500 employees you might think that none of your employees would file discrimination charges against your company.
But a just-released survey by Hiscox dispels that myth, showing just how costly employment matters can be for small and medium-sized enterprises (SMEs)—and how important it is to have employment practices liability (EPL) insurance.
A representative study of 446 closed claims reported by SMEs with fewer than 500 employees found that some 19 percent of employment charges resulted in defense and settlement costs averaging a total of $125,000. On average, those matters took 275 days to resolve, Hiscox found.
While the average self-insured retention (deductible) for these charges was $35,000, without employment practices liability insurance, these companies would have been out of pocket by an extra $90,000, Hiscox said.
“Most employment matters don’t end up in court, but for those that do, the damages can be substantial,” Hiscox noted.
Its survey cites data showing the median judgment is approximately $200,000, which is in addition to the cost of defense. About 25 percent of cases result in a judgment of $500,000 or more.
Where a business is located can make a big difference in the potential employment exposure it faces.
The 2015 Hiscox Employee Lawsuit Handbook found states with the highest risk of employees filing lawsuits are: New Mexico (66 percent higher than national average), Washington DC (65 percent higher), Nevada (47 percent higher), Alabama (41 percent higher) and California (40 percent higher).
Overall, U.S.-based companies of all sizes have at least an 11.7 percent chance of having an employment charge filed against them, Hiscox found.
Claims Journal has more on this story here.
Wondering what’s covered by EPL insurance? The Insurance Information Institute (I.I.I.) explains all here.