BOPping in on employment practices liability insurance

It’s the ogre hiding under the bridge. And a hungry ogre at that. The owners of many small- to mid-sized companies hope to tip-toe by without incident, but there is no ignoring the potential for trouble.

The number of legal claims filed against employers by their employees is startlingly high — and getting higher all the time. All businesses — small, medium and large — are vulnerable. It used to be that large companies were the most common targets. Today, however, more than 50 percent of employment-related claims are brought against companies with fewer than 100 employees.

In 2004, more than half of all companies —57 percent — were sued by an employee, up 8 percent over the previous year. Employment-related lawsuits now comprise one out of every 12 federal court cases.

It’s not only the number of cases that is growing, but also the financial impact, with juries awarding more than $1 million in 12 percent of employment-related cases. To say nothing of the cost in reduced employee morale and productivity, as well as increased workers’ compensation costs.

While more than 75-percent of cases are found to be without merit, the cost of mounting an effective legal defense, in terms of time, money and distraction, can devastate a business all by itself — especially a small- or mid-sized business.

But there is an effective defense against this ogre. It is called employment practice liability insurance (EPLI) and it is available to most small- to mid-sized businesses through local independent insurance agents.

Avenues BOP

My own company, The Hanover Insurance Group, continually reviews and enhances its products and services to assure that its capabilities meet the local market needs of our independent agent partners and their clients.

Because small- to mid-size business is an important market segment for our agent partners, earlier this year, we introduced EPLI as an endorsement to our Avenues Business Owner’s Policy, or BOP, product, and our agents are responding with strong and very positive feedback.

Avenues BOP is part of our small commercial platform, which allows agents to quote and, in most instances, issue BOP, commercial auto, umbrella and workers’ compensation policies, and complete endorsements, all online.

Offering EPLI as an endorsement to Avenues BOP allows our agent partners to initiate discussions with their commercial customers, right at the point-of-sale, about potential risks to their business, reinforcing the important role of the independent insurance agent as a valued consultant and asset to the business.

Because it is structured as a BOP endorsement, this EPLI is more affordable for small businesses than most stand-alone policies. Businesses can choose between the standard EPLI limit of $25,000, or opt for the higher limit of $100,000 or $250,000, with applicable state-specific guidelines for limits and deductibles. Minimum limits vary by state.

The EPLI product provides protection for the business entity, its owners and partners. Coverage is on a claims-made basis, and includes sexual harassment, job discrimination and wrongful termination claims made by full-time, part-time, seasonal and temporary workers. It does not cover prior acts, known acts or criminal acts.

Other product features include expert claims service, a loss-prevention program, an automated POS entry system, and automatic endorsement capabilities that help agents move through the sales process with maximum speed and efficiency.

Client’s needs

Unlike a stand-alone product, which may include too much coverage at too high a cost for a small business, our EPLI endorsement is tailored specifically to meet the needs of businesses with up to 25 employees — a key commercial target for our independent agent partners.

The best defense against lawsuits is to avoid them altogether, so we also provide experienced EPLI claims specialists and access to a valuable loss-prevention program — important value-added services geared especially for small- and mid-sized businesses.

While some commercial customers are quick to dismiss the need for EPLI, independent agents, in their role as consultant, only need to point to the hard statistics — to that ogre under the bridge — that the small- and mid-sized business owners will someday be sued by an employee.

When business owners weigh the cost of the endorsement against the potential cost of claim, EPLI will appear to be not just a value, but an essential element in a smart and comprehensive plan for insurance protection.

For 2007, The Hanover looks forward to further strengthening its Avenues commercial lines suite, when we will introduce more BOP specialty products and new smart Web solutions for agents, including an enhanced POS system with a unique “account view” that helps agents to manage and grow client relationships more efficiently.

Topics Agencies Claims