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Technology Insurance
Loss Scenarios for IT Firms

Sexual harassment
A female employee exhibited a sudden drop-off in her work performance. Her supervisor set up a meeting with her to discuss her performance, but she failed to show up. She did show up for a rescheduled meeting, but she had alcohol on her breath. She complained during the meeting that she faced continuous sexual harassment from a senior manager and that his unwanted advances had created a hostile work environment. Her supervisor suggested that she take another position in the company at a different location, which the woman agreed to do. However, she failed to show up for work at the new location and skipped several more meetings with her supervisor.

The company terminated the employee, and she filed a lawsuit, alleging sexual harassment and wrongful termination and seeking $1 million in damages. In her suit, she alleged that a senior manager had been sexually obsessed with her for nearly two years, had maintained an uncomfortable closeness with her in the workplace, and had continually harassed her with questions about her personal life.

It was later discovered that the female employee and the senior manager were engaged in a consensual romantic relationship over the two-year period.

RESOLUTION The company determined that it would rather settle than go to court. After paying more than $120,000 in defense costs, the company settled with the former employee for $250,000.


Growing Vulnerability Makes Employment Practices Liability Insurance a necessity


Most IT and technology firms recognize that employees are their most valuable assets in running an efficient business. However, you may not be aware of your growing vulnerability to exposures resulting from your liability as an employer. Businesses today are increasingly at risk for liability claims and lawsuits that arise from employment practices and related human resources issues, such as sexual harassment and discrimination.

Employment practices related lawsuits — lawsuits alleging discrimination, wrongful termination, sexual harassment or retaliation — continue to grow in both frequency and severity according to the latest employment practices liability insurance statistics. In fact, over the past 10 years, federal employment laws, together with parallel state laws, have expanded employees’ rights in the workplace, opening the way for new “causes of action” to be brought against employers and broader than ever rights of recovery. Third parties, such as customers, consumers and clients, are also more frequently seeking legal recourse for alleged discrimination or harassment.

These trends, coupled with more expansive judicial interpretation of applicable laws, have gone hand-in-hand with the emergence of a professional plaintiffs’ bar eager to drive employment related lawsuits against employers. The employment practices liability insurance statistics tells us that EPLI claims are on the rise — that's why you need Employment Practices Liability Insurance for InsureCast. If you don't get it form us. Get it from someone else. It is that important.

You can try to do everything right and still find your business subject to claims of wrongful employment practices. Whether the allegations against you are legitimate or unfounded, you may be faced with expensive legal bills. InsureCast is your source for Employment Practices Liability Insurance for technology firms. Please go to our online CoverageCoach questionnaire to get a free no obligation Employment Practices Liability Insurance quote.


Increase in EPLI Litigation

The tremendous increase in employment-related litigation during the past several years makes Employment Practices Liability Insurance an essential coverage. Claims for wrongful termination, discrimination and sexual harassment continue to be a serious concern for the technology community. Judgments, settlements, and defense costs for employment-related litigation continue to rise at an astonishing pace.



Employment Practices Liability Insurance


What is Employment Practices Liability Insurance?

Employment Practices Liability Insurance is a relatively new form of liability insurance. It provides protection for an employer against claims made by employees, former employees, or potential employees. It covers discrimination (age, sex, race, disability, etc.), wrongful termination of employment, sexual harassment, and other employment-related allegations. It covers your firm, including its Directors and Officers.


When do I need Employment Practices Liability Insurance?

Employment Practices Liability insurance is needed as soon as you start to hire employees. Most investors and directors will require that you carry this coverage as part of your Directors and Officers Liability insurance since they can also be held liable in suits relating to employment practices.

Why do I need Employment Practices Liability Insurance?

Employment Practices Liability Cases against employers are on the rise. It is estimated that three out of five firms will be sued by an employee. Companies are finding that they are vulnerable from the pre-hiring process through the exit interview, even if the employee was never hired, or only at the company a matter of days.

It can happen to ANY firm. We have all experienced it. It could be a joke told in the break room, an employee you had to fire, a “friendly” programmer, or that person you chose not to hire. Every employer faces the reality that it will be the target of legal action from past, present and prospective employees. Even if the claim is groundless or fraudulent, the defense of a suit can be expensive in time, resources and financially.

New technology firms are especially vulnerable. Newer and fast growing companies are often prey to employment practices liability claims because their management team has not yet designed or implemented procedures for hiring, firing, and disciplining employees.

Welcome to the reality. Just because you might not have told the off-color joke to the new employee on her first day, your Independent Contractor, or client, might not think the same way. It's still your firm that gets sued, and you can't always monitor every hire, termination, or conversation that takes place in your office. Nor can you always know who will sue, and you can't always prevent a disgruntled employee from lying or exaggerating just to “get even” with your firm.


Employers face a growing multitude of serious employment practices liability (EPL) exposures

It’s no longer off the radar screen. It’s front page material. More and more companies are finding out the hard way just how complex the employment relationship has become. Employers face a growing multitude of serious employment practices liability (EPL) exposures in their day-to-day interactions with employees.

Companies and their managers are subject to a widening collection of federal, state, and local employment laws, such as the Americans with Disabilities Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, and Title VII of the Civil Rights Act of 1964, just to name a few. The Equal Employment Opportunity Commission (EEOC) is taking a much more aggressive stance in investigating EPL claims and filing lawsuits for sexual harassment, women being discriminated in the workplace, wrongful termination, retaliatory treatment, unfair hiring practices, and other types of workplace torts.

The average number of charges filed with the EEOC from 1996 to 1999 was nearly 80,000 annually. Monetary awards increased 275% between 1994 and 1999, when the total amount awarded topped $100 million. The average verdict in EPL cases now exceeds $450,000, and employment issues now make up 30% of all civil litigation in the U.S. Court cases of discrimination in the workplace and age discrimination court cases are on the rise. The truth is, the courts have decided, the employee is almost always right. According to the Department of Labor, employees and other plaintiffs won 41% of all jury trials and 26% of all non-jury trials in 1999, and punitive damages were assessed in 19% of all cases.

Repercussions of these lawsuits can be felt well beyond their initial devastating and distracting impact, because one large uninsured employment practices claim can lead to shareholder lawsuits. Discrimination lawsuit settlements and cases of wrongful termination have had a dramatic affect on the bottom line of small and large businesses in the United States.

There’s no question that EPL claims can have a serious financial impact on small to mid-sized companies. To help protect private companies and their employees, InsureCast offers Employment Practices Liability Insurance coverage.

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