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Do You Know The Cost To Defend An Employment Practices Claim?

November 29, 2011

For many employers, the need for Employment Practices Liability Insurance (EPL) has moved from a “nice to have” endorsement to a “must have” insurance policy. There is a reason for this. According to data from the United States Equal Employment Commission, the agency responsible for enforcing federal discrimination laws, the number of complaints received in 2010 was up 7% from the prior year. By far, the most interesting statistic is not the 99,922 complaints but rather the 64% of these where there was no reasonable cause.

This sounds like great news…you have a good employee manual, you are well versed in what you can and cannot say during an interview, your employees like you and you would never make a disparaging comment about anyone. So, with a better than 50/50 chance of there being no reasonable cause for a complaint, who needs insurance? You do! Even an organization with sound human resources policies and procedures in place can be sued and the average cost to defend an employment practices claim is in excess of $100,000. Take a look at the typical defense costs:

Defense of an Equal Employment Opportunity Commission or
Administrative Charge Against your Business
Cost: $4,000 – $7,000

Lawsuit Filed Against your Business
Cost: $12,000 – $18,000

Pretrial Filings And Preparation
Cost: $20,000 – $30,000

Mediation
Cost: $10,000 – $15,000

Motion for summary judgment filed
Cost: $8,000 – $12,000

Trial
Cost: $15,000 – $25,000

Total Cost $69,000 – $107,000

One more sobering thought. If you do go to trial, the plaintiffs win about 58% of employment cases tried before juries. When considering the need for an employment practices liability policy, it’s not as much about whether you can win but whether you can afford to defend.

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