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Winter 2020   Volume 30, Number 1        
 

person blowing whistle

How to Insure against Alleged Whistleblowers

Employees file lawsuits against their employers for many reasons.

A 62-year-old white male employee with a positive performance record and favorable bonuses was terminated by a foundation. He sued the foundation, alleging he was terminated from his job so that the employer could hide a pattern of discrimination against women and minorities. The employee further alleged violations of the Age Discrimination in Employment Act (ADEA) and Title VII of the 1964 Civil Rights Act.

Before we tell you the outcome of this "whistleblower" lawsuit, let's talk about what kind of insurance that employer should have been carrying to help with that claim.

The type of policy most likely to respond would be Employment Practices Liability Insurance (EPLI), which covers businesses against claims by workers that their legal rights as employees of the company have been violated.

According to the Insurance Information Institute (III), the number of lawsuits filed by employees against their employers has been rising. While most suits are filed against large corporations, no company is immune to such lawsuits. Recognizing that smaller companies now need this kind of protection, some insurers provide this coverage as an endorsement to their Businessowners Policy (BOP). An endorsement changes the terms and conditions of the policy. Other companies offer EPLI as a stand-alone coverage.

EPLI provides protection against many kinds of employee lawsuits, including claims of:

  • Sexual harassment
  • Discrimination
  • Wrongful termination
  • Breach of employment contract
  • Negligent evaluation
  • Failure to employ or promote
  • Wrongful discipline
  • Deprivation of career opportunity
  • Wrongful infliction of emotional distress
  • Mismanagement of employee benefit plans

The cost of EPLI coverage depends on your type of business, the number of employees you have and various risk factors such as whether your company has been sued over employment practices in the past. The policies will reimburse your company against the costs of defending a lawsuit in court and for judgments and settlements. The policy covers legal costs, whether your company wins or loses the suit. Policies also typically do not pay for punitive damages or civil or criminal fines. Liabilities covered by other insurance policies such as workers compensation are excluded from EPLI policies.

To prevent employee lawsuits, educate your managers and employees so that you minimize problems in the first place:

  • Create effective hiring and screening programs to avoid discrimination in hiring.
  • Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
  • Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
  • Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.

So, what was the verdict in the Whistleblower case? The jury awarded the employee $55,000 in compensatory damages and $325,000 in punitive damages.

If you don't currently carry EPLI insurance and would like more information, please give us a call.

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In this issue:

Risk Tip

Are Insurance Companies Prepared for Another 9/11?

How to Insure against Alleged Whistleblowers

6 Workers Compensation Regulation Trends to Watch in 2020

How Does WC Coordinate with Social Security and FMLA?

 

 


The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing and The Insurance 411 do not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher’s permission. All rights reserved. ©2020 The Insurance 411. Tel. 877-762-7877. www.theinsurance411.com