Employment Practices Liability Insurance is a relatively new form of insurance designed to protect the employer from lawsuits against the restaurant coming from employees, including current, former and prospective employees.  These claims can arise from discrimination, invasion of privacy and even whistleblower retaliation type claims.  The scope, nature and incidence of these types of claims is on the rise and feeding a whole new generation of attorneys and their families.  The risks for a restaurant owner are huge and growing all the time.  So why do so few restaurant owners purchase EPL Insurance?

There are a number of reasons why restaurant owners are missing this exposure in their risk management process.  Many of these reasons come down to them not understanding the true nature of the risk.  Let’s take a look at those first.

Many restaurant owners tell me that they don’t really think the risks apply to them.  They tell me that they are meticulous in their hiring practices and that they treat their employees better than anyone else does.  As such, they feel that they would never face a lawsuit of this type.  This kind of thinking skims over a couple of risks that they face, even if all of the above is true.  One is that while they may be meticulous about whom they hire, they may not understand all the dos and don’ts of what they can say and what they can ask in the interviews and hiring process.  This is one area that can lead to trouble.  But, assuming that you get past the hiring process with no problems, you may still face risks due to the way one employee treats another at your workplace.  Your managers may engage in sexual harassment or subtle forms of discrimination without your knowledge and these behaviors could result in claims against you and your restaurant.

Another reason for not buying this an EPLI policy is that some think that the cost of these claims is relatively low and that they will self insure this exposure.   I think this kind of approach is more like sticking one’s head in the sand than sound risk management.  The average size of EPL claims is rising every year.  From 1994 to 2006 the average jury award on these claims has risen from $93,000 to $200,000.  Today the median award amount is well over $200,000.  And remember, this does not include the legal defense costs which can run well over $60,000 per claim.  Again these are just averages, obviously some claims far exceed these numbers.  If you are truly self insuring as opposed to sticking your head in the sand, then you should probably keep $1 million or more in the bank ready for this type of claim.

Many restaurant owners simply consider EPLI to be an optional coverage.  Now these same business owners would never consider self insuring their general liability insurance.  Consider that there are more employment practices liability actions (EEOC filings and lawsuits) each year than general liability claims.  Given that and the fact that almost no restaurant owner is willing to be without general liability insurance, I have to believe that these choices are made from ignorance rather than fact.

The most likely reason that so few restaurant owners purchase EPL Insurance is probably that they are unaware of the risks, the protection, or the need for it.  This generally comes down to a failure of their agent to keep them informed and up to date on the risks that they face and how insurance could help protect them.  If you own a restaurant, then you should hire an insurance agent who insures many other restaurants to help you buy the best possible protection at the best price.  Clinard Insurance Group, located in Winston Salem, NC is such an agent.  We insure over 100 restaurants across North Carolina and South Carolina and we would love to help you with your restaurant insurance needs and questions.  Please give us a toll free call, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.

So many restaurant owners in NC have not yet figured out that they face a huge liability risk that isn’t covered by their general liability insurance or their businessowners insurance policy.  This risk is employment practices liability insurance and it is riding an eastward wave from the litigious environments of California and Texas.  EPL Insurance, called EPLI is your best defense against this oncoming atrocity but very few restaurant owners in NC or SC have taken the time to understand or purchase protection.  For those that have, this blog addresses a central question surrounding this protection.  How much coverage to buy?

I want to start this discussion by advising you that in NC, EPLI is not yet a standardized policy.  This means that the policy wording can be very different from one policy to the next.  This lack of standardization means that you have to be very careful when you purchase EPLI to be sure that you know exactly what you are and what you aren’t buying.

When it comes to purchasing EPLI, there is an easy way out that I tend to think of as the lazy man’s approach.  And I don’t recommend it.  Many insurance companies are now offering some EPL protection as an add on endorsement to your businessowners policy.  There are several problems with this approach.  The main problem is that the limits offered by these endorsements are typically very low, sometimes as low as $25,000 or less.  The deductibles tend to be very high and the coverage language in the endorsement is often very restrictive.  If you determine that you need employment practices liability insurance, and I think every business with employees does, then you should seek out a stand alone policy that will generally allow you to purchase broader coverage and higher limits.

So how much EPLI should you buy?  The answer is as much as you can afford.  Unlike say, having your building burn down, the limit of loss you face with a discrimination or sexual harassment claim can be nearly unlimited.  And most EPLI policies have a limit that is a per year aggregate.  That means each claim that you have reduces the amount of insurance you have ready for the next claim.  And often, one successful claim by a disgruntled employee can lead to another by a different employee.  You must have enough insurance to weather these claims if and when they come.

Another reason for needing higher liability limits with EPLI than you might at first think is the fact that, unlike with your businessowners liability policy, where defense is unlimited and outside of your policy limits, with an employment practices liability insurance policy, defense expenses draw down on your policy limit.   And often, defense is the biggest expense of the claim.  You must defend yourself from these claims and you have to make sure that you have enough coverage in place to do this.

One more reason for purchasing high limits is that you want to keep your defense team in the game the whole way.  With lower limits you could run out of coverage and then have to change lawyers midstream as you start paying out of your own pocket.  This lawyer change could negatively affect the outcome of your case and cost you even more money in the long run.

I have heard the argument made that if your employees don’t think you have this protection then they are less likely to sue you since they won’t believe there is as much there to take from you.  There may be a grain of truth in this argument, and if you believe it, then buy the coverage and don’t let them know you have it.  This will be much safer than paying for defense costs out of your pocket, not to mention the costs of the settlement.

EPLI is a relatively new but extremely important insurance policy that no restaurant owner should be without.  If you aren’t currently using an agent with extensive experience in restaurant insurance, perhaps you should rethink your choices.  Clinard Insurance Group, an independent insurance agency in Winston Salem, NC has a great deal of experience with restaurant insurance.  We insure over 100 different restaurants all across NC and SC.  If we can be of help to you with your restaurant insurance policies, please give us a toll free call at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com

Savvy restaurant owners know that operating without an employment practices liability insurance policy in force is like try to run their restaurant with several employees holding a gun to their head each day.  The risks are just too great and the costs of failure are epic – you could lose your livelihood.  But EPLI is a very different animal from all of the other insurance policies you buy and as such, you must take a little more time to make sure that you understand exactly what you are buying.  One of the more difficult concepts for a restaurant owner to wrap his or her head around has to do with the claims made clause in these policies.

Let me start by making it clear that EPLI policies in NC are still not very standardized.  The language is certainly moving in that direction but for now, one policy can differ quite a bit from the next.  Of course this makes the insurance buying process a bit tougher but the exposures involved are just so great that you simply have to take some time to be sure that you understand what is and what isn’t covered.

This blog is part 2 of a 4 part process and what I want to discuss with you in this article is the claims made clause.  Most liability policies that you purchase, are based on occurrences, that is, if the loss occurred during the policy term, then it is covered, no matter when the suit is filed or the loss is brought to your attention.  That is pretty straightforward and easy to understand.  But Employment Practices Liability Insurance is different.  These policies are written on a claims made basis.  This means that the claim has to be filed while the insurance policy is still in force to be covered.  So, if you have this insurance for a year, then decide not to renew it and 4 months later you find out you are being sued for wrongful termination that happened 8 months ago, you will find yourself without coverage.  Why does this clause exist in these policies?  Well, simply to protect the insurance companies and to help them make the claims process more predictable so that they can create pricing models that are reliable.

So what must you do to protect yourself against claims made coverage gaps?  Well the simple answer is to pick an insurance company and stick with them.  If you don’t change policies, then you should be fine from year to year as your continuous coverage and the extended reporting period built in to most claims made policies should keep your protection consistently in place.  But what about when you want to change insurance companies and move your EPLI protection to a new company?  The new policy is not going to cover the losses that occurred in the old policy term but that are not reported until much later.  In this case, your best bet is to purchase what is called tail coverage from the first insurance company.  Generally the rates on these tail coverage policies are no more than 2 times the rate on the original policy and can usually be purchased for a time period up to two years.

As you can see, claims made policies create issues for the insurance buyer that are unfamiliar and unusual.  But if you don’t take care of these issues very carefully, you could find yourself with an uncovered claim.  And not only can that be disastrous for your restaurant, but extremely frustrating for you after you have spent money, possibly for years,  to protect against this type of thing.  If you are going to buy insurance to protect against a risk for even one day, then you will of course never want to be without that protection.

Clinard Insurance Group is an independent insurance agency located in Winston Salem, NC.  We want all insurance consumers to be informed buyers when it comes to insurance purchases.  We insure over 100 restaurants all across NC and SC and would love to help you with your restaurant insurance needs.  Give us a call today, toll free, at 877-687-7557 and let us put our experience to work for you.  If you would like to visit us on the web, go to www.TheRestaurantInsuranceStore.com.

Most restaurant owners are pretty savvy insurance buyers.  They have to be.  They need to have a clear understanding of property insurance, general liability insurance, the businessowners policy, commercial auto insurance as well as any insurance benefits that they offer to their employees.  But one type of insurance policy is very often overlooked – The Employment Practices Liability Insurance Policy.  The reasons that restaurant owners overlook this important protection are many.  If their agent doesn’t bring it to their attention, then few even know about the risks they face, much less how to insure against it.  Some may incorrectly assume that this protection is part of their businessowners policy.  And in NC, the lawsuits which make this insurance so important are just now spreading in from California and other western states.  It’s coming, and you want to be ready.

So, what is Employment Practices Liability Insurance, referred to as EPLI?  This blog is the first of a 4 part series that takes an in depth look at this relatively new and fast growing area of litigation and the insurance policy that has grown up to help protect you and your business.  This blog will be more of an overview and subsequent blogs will take a look at the finer details of these policies.

Employment Practices Liability is liability that your company faces for actions you take that create lawsuits against you from employees, both former and current as well as from those people that you don’t hire but may have offended or discriminated against in the interview and hiring process.  Any company that has employees, or that may hire them in the future should not be without an Employment Practices Liability Insurance Policy.

So what are some of the real world types of actions and behaviors that are covered by these policies?  Well, first of all, understand that these policies are fairly new and are not very standardized so it is very important that you understand in great detail exactly what you are buying.  But in general, most policies cover legal expenses and judgments related to discrimination in hiring or employment related to age, sex, race, health, sexual orientation, nationality and many other forms of discrimination.  Most policies also include coverage for sexual harassment and wrongful termination as well as whistleblower claims.  None of these types of claims are covered by your general liability insurance or your businessowners policy so it important that you take positive action to cover this exposure.

EPLI should be an integral part of your insurance portfolio if you are determined to protect your business from large, unforeseen losses that could wipe you out.  At Clinard Insurance Group, in Winston Salem, NC, we insure over 100 restaurants all across NC and SC and we can help you make sure that the policies that you are buying are set up correctly and will protect you when the losses come.  Don’t trust your very livelihood to an insurance agent who doesn’t live, eat and breathe restaurant insurance.  The risks are just too high.  Give us a call today, at 877-687-7557 or visit us online at www.TheRestaurantInsuranceStore.com.