What the risk-management process lacks in excitement it more than makes up for in importance. Since the absence of an effective risk-management plan can undermine even the most successful business, minimizing or eliminating risk is the cornerstone of any profitable commercial venture.
When developing a risk-management strategy, business owners typically focus on protecting against the most obvious source of potential liability to the exclusion of others. For self-storage facilities, this often means risk-management focus is almost entirely on the physical site as well as the property stored on the premises for others, and any liabilities that may result if such property is lost or damaged. But there is another considerable exposure.
Consider this: An employee in your organization files a discrimination lawsuit alleging she was not promoted because of her gender. You’re confident the promotion went to the better-qualified candidate and have sufficient documentation to support this decision. Still, having to defend your company against her claim in court could be costly; legal fees might seriously deplete your business’s cash reserves, perhaps even lead to bankruptcy.
But you were smart. Two years ago, you purchased an employment practice liability insurance (EPLI) policy, which covers precisely this sort of situation, ensuring your business is protected from a possible financially devastating loss.
Such a scenario is quite possible in today’s increasingly litigious business climate, in which even the most proactive employers can find themselves in violation of one of the many employment laws governing the workplace. In fact, according to the Equal Employment Opportunity Commission (EEOC), the likelihood of experiencing such a scenario is greater now than it has been in the last decade.
In 2007, employees filed almost 83,000 charges with the EEOC, including charges of discrimination on the basis of race, sex, national origin, religion, age, disability and retaliation. This figure represents the first increase in the number of annual charges filed since 2002. Although a precise explanation for the recent surge in employment-related charges may not be available for quite some time, it is possible that the struggling economy may play a significant role.
In any event, the result for business owners is the same: a significantly increased risk of exposure to employment-related liabilities that can push already struggling businesses over the edge. That’s why EPLI has become an almost necessary part of a business’s insurance umbrella.
The Right Protection
EPLI protects employers against workplace claims such as discrimination, wrongful termination and sexual harassment, whether perpetrated by employees or other individuals. These policies can also be extended to provide coverage for acts discriminating against customers or prospective customers (client discrimination).