Don’t Let an EPLI Insurance Gap Put You Out of Business
by Joe Schillaci, Jr. CIC
December 28, 2016
EPLI insurance covers wrongful acts arising from the employment process. The most frequent types of claims are wrongful termination, discrimination, sexual harassment, and retaliation.
Case in point, this particular insured worked hard for years to establish his business and make it successful. Part of that hard work was choosing what he thought was the right business insurance policy. But was it the right policy or was it just the best price? The insured was quoted by the three different insurance agents whom he placed in direct competition for his business. He let it be known to each agent up front that his primary consideration would be price and not coverage.
Business was going well for this particular insured until one day when the insured receives a letter from an attorney’s office informing him that he is being sued for wrongful termination. He now has an uncovered EPLI insurance claim against his business.
You Have No Coverage
The insured calls his insurance agent to report the claim and the agent confirms that he rejected EPLI coverage. The insured now sits in stunned silence as he tries to process what this will mean to his business. He remembers one of the agents going into great detail about the changing legal environment and the urgent need for all business with employees to have an EPLI policy. Of course, this proposal was rejected because it was a little more expensive than the one the insured ultimately chose.
In less than one year, the insured is closing his business. The claim turned out to be baseless, but the legal cost of defending the claim was more than the business could handle. The insured lost everything because he rejected the professional advice provided by their insurance agent. This is a classic case of being “penny wise and pound foolish”.
This is no exaggeration, if anything, I am understating the consequences. Every day in America, a business goes under because of gaps in coverage just like this one.
Weighing The Costs
This small business owner pitted agents in competition with each other for his business. The challenge he presented to the agent was not to find the proper coverage at a fair price. Instead, the challenge was simply to compare apples to apples and obtain the cheapest prices based on last years coverages. That was the key to winning his business. Since these agents were competing for his business based solely on price, they did not bother to present optional coverages such as EPLI.
What The Insured Should Have Asked For
The insured should have requested the proper and necessary coverages for his business at a fair price. Insurance is not a commodity and should not be purchased using the same parameters as one would use to buy a sack of potatoes. Your business can recover from a cheap sack of potatoes, what your business can not recover from is gaps in coverage such as EPLI and Cyber Liability. Be careful to avoid this insureds mistake. Don’t be penny wise and dollar foolish when it comes to properly insuring your business.