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Friday, Mar 29, 2024

Insurance That Helps Firms in Worker Suits Gains Popularity

Ryan Herco Products has faced few lawsuits stemming from complaints involving employees. But the Burbank-based fluid handling products distributor has in its corner a tool many companies are turning to as protection against the day when high-cost litigation strikes employment practices liability insurance. “You never know when you’re going to have a disgruntled employee,” said Nicole Bulman, the company’s human resources manager. “You hope that you never have to use it as employee-related claims can get very expensive.” Emerging out of an era of increased awareness about workplace sexual harassment and discrimination in the early 1990s, employment practices liability insurance has gained popularity. In 1991, only five insurance carriers offered EPLI, according to Betterley Risk Consultants, Inc., author of the insurance industry-related Betterley Report. That number grew to 55 as of 2005 although the number has stabilized due to consolidation in the insurance industry and maturation in the product line, the company’s December report said. Betterley estimates there was $1.4 billion in written premiums for EPLI in 2004. Still, companies may not always carry EPLI due to not knowing it exists or concern over its cost. “It’s important to have it to cover yourself a bit,” said Barry Cohn, of RGEB Employee Benefits in Tarzana. “We get questions all the time from clients who have not done things properly and then find themselves in the hot seat.” Cohn identified smaller companies with 100 employees or less as potentially opening themselves up to litigation because they may not have a full time human resources administrator and are not up to date on labor issues. Enforcing policies Human resources personnel can play a key role in helping a company take a proactive approach to prevent employee-related lawsuits by setting out and enforcing policies and guidelines. “It does no good to have the insurance if they are not following policies to avoid claims,” said Geri Rivers, a partner with MBS Consultants, a Rancho Cucamonga firm that works with companies to develop employee handbooks. Ryan Herco has non-discrimination and harassment policies that are gone over at orientations with employees who then sign a form indicating they had been told about them, Bulman said. Carriers often won’t provide EPLI without guidelines in place, Bulman said. “Insurance companies want to make sure the likelihood (of litigation) is lowered,” she added. “The want to know a company is doing the right thing.” The reasons a company drags its feet on purchasing a policy can be several from not being able to afford the cost, to not wanting to accept that employees would want to sue. “Smaller employees tend to be entrepreneurs and fast growing,” Rivers said. “If they are a machine shop or manufacturer they are busy making a product and don’t know if it’s something they should consider.” Learning lessons Tom Leman, sales manager with Northridge Insurance Agency in Chatsworth, said that about 33 percent of the firm’s business clients have purchased EPLI. When they do purchase a policy it’s because they have been impacted by a lawsuit or threatened with one, Leman said. “I’d like to say we sold them the policy for compelling reasons, but most employers think it won’t happen to them,” Leman said. “This can happen with somebody with just one employee,” Then there is the issue over control of the company. By having the insurance it brings in an outsider to decide whether to litigate a claim, to settle a claim and on what basis to settle, said employment law attorney Richard Rosenberg. “It’s like medical insurance, how you can argue that it’s bad?” said Rosenberg, a name partner in a Universal City law firm. “By the same token you are involving the insurance carrier in business decisions.” The issue of controlling a company’s future is “huge,” Rivers said. “(Companies) are nervous about doing it. They see more money being spent. They are fearful the employees won’t like it,” Rivers said. “If they are entrepreneurs they want to stay in control.” Leman admits that “friction” does exist between the insurer and the client on issues such as who hires an attorney to handle a lawsuit but for good reason. With employment laws changing, an insurance company needs to be secure in who is handling the claim. “They need someone with knowledge in employment law,” Leman said. “If they go with someone wanted by the company they don’t know if that attorney is sharp and up to date and how they are in court.”

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