Why You Need Both Errors and Omissions & Employment Practices Liability Insurance
Posted December 30, 2022 in E&O Insurance
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An errors and omissions (E&O) policy protects businesses from damages to clients and customers. Employment practices liability insurance (EPLI) covers the business from employee claims for company policy violations or other practices that have allegedly harmed them.
Because of the litigious society we live in and the stricter labor laws that have recently been enacted, it’s more important than ever to have both E&O and EPLI insurance.
Call (951) 368-0700 today for more information about our services and how we can help ensure your business has the right coverage at the right price.
Who Needs E&O Insurance?
Professional liability or E&O insurance is a must for any business, big or small, especially when it involves providing professional advice or services.
We live in an imperfect world, and honest mistakes happen in business all the time. An E&O policy protects your company’s bottom line when a client makes a complaint or takes legal action against you for late, unfinished, or unsatisfactory service, regardless of merit.
Who Needs Employment Practices Liability Insurance?
EPLI covers employers when an employee or contractor files a lawsuit alleging improper or illegal labor practices.
Common accusations that lead to lawsuits include:
- Invasion of privacy
- Wrongful termination
- Unfair discipline or demotion
- Defamation of character, including libel or slander
- Failing to hire or promote for discriminatory reasons
- Emotional distress caused by unfair workplace practices
- Sexual harassment committed by owners, managers, or co-workers
- Discriminatory behavior of any kind based on age, gender, sexual orientation, ethnicity, or religion
Who Needs Both E&O and Employment Practices Liability Insurance?
If you have employees and your business provides a service, you absolutely need both E&O and employment practices liability coverage to protect you and your company from catastrophic legal costs.
While obtaining E&O insurance for most businesses is a no-brainer, some owners contemplate long and hard about adding EPLI coverage. While it’s true that having only one or two employees puts you at less risk of a labor-related lawsuit, it certainly doesn’t prevent one.
Compliance With Current Labor Laws
The US federal government has numerous laws making it illegal for business owners, managers, directors, and even co-workers to discriminate against potential, existing, and former employees based on age, gender, sexual orientation, race, disability, ethnicity, or religion.
Many of these laws typically apply to businesses with 15 or more employees, and the Equal Employment Opportunity Commission (EEOC) doesn’t usually intercede in cases involving small businesses with fewer employees.
However, these microbusinesses can still be sued for discrimination or harassment, and each state has its own (often similar) labor laws, which every employer must follow.
High-Risk Businesses
While no business is exempt from labor laws or immune to employee or contractor lawsuits, the following industries are at higher risk of employment-based lawsuits.
- Retail
- Restaurant
- Professional or personal services
- Manufacturing
- Healthcare
- Transportation
- Automotive
According to the Conflict Solutions Center, the average price of litigation for employment-related claims is $160,000, not including judgment or settlement costs, with punitive damage awards averaging $2.7 million.
Employment practices liability insurance helps protect your business and livelihood from being dramatically impacted by costly claims and lawsuits. EPLI covers legal fees, judgments, and settlement costs partially or entirely, depending on your policy’s limit.
If Your Business Has Two or Fewer Employees
Every company needs E&O insurance, regardless of size. The only businesses that may not benefit from carrying EPLI are those with less than three employees or employing only a few family members.
However, employee claims of unfair employment practices can still occur.
Learn More About Your Business Insurance Needs
Gallant Risk & Insurance Services is conveniently located in the Southern California city of Corona, and our agents are committed to providing the most complete and cost-effective insurance policies for businesses of every size.