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EPLI Insurance

EPLI: A Growing Necessity

By Jillian Harman

As businesses confront a rising tide of employment-related lawsuits and customer grievances, Employment Practices Liability Insurance (EPLI) emerges as a crucial line of defense. EPLI shields organizations from claims stemming from harassment, discrimination, bullying, and wrongful termination. It has also become a critical necessity for all businesses that have direct contact with customers. 

The Surge of Employment Claims

The uptick in employment-related lawsuits in recent years underscores the significance of EPLI for businesses of all sizes. According to the U.S. Equal Employment Opportunity Commission (EEOC), there were 67,448 charges of workplace discrimination filed in 2020. The EEOC obtained $439.2 million for victims of discrimination in the private sector and state and local government workplaces. 

Small businesses are particularly vulnerable. EPLI can provide a crucial safety net, ensuring that the business has the financial support needed to weather potential claims.

In addition, it’s important for all businesses to have clear guidelines for employees to follow. Even if your company does not have a human resources department, it’s prudent to procure a written employee handbook that addresses grievances, performance evaluations, sexual harassment, terminations, discipline, discrimination, violence, and hostile situations. 

Third-Party Liability

Third-party liability coverage extends protection to claims made by non-employees, such as customers, vendors, or independent contractors. This coverage is crucial since businesses can face considerable financial and reputational repercussions from third-party claims.

The current business climate has become focused on ensuring diversity, equity, and inclusion in the workplace, which has also spilled over into customer interactions. This arena has become ripe for claims and accusations related to discrimination based on race and gender, which many businesses can find hard to guard against. Coupled with people’s ability to easily video record public outbursts and confrontations, businesses must tread carefully to ensure employees are well prepared to diffuse situations that could result not only in lawsuits but also reputation damage when videos are shared on social media.

As more groups demand special treatment under the banner of equity and inclusion, all businesses, even business-to-business and solopreneurs, must protect themselves from both legitimate and fraudulent claims. Even if an accusation never makes it to court, the reputation damage to your company could be devastating. Having insurance to protect you from slander and libel is crucial even if it can do little to protect you in the court of public opinion. 

Even Websites are at Risk

The rise in civil cases related to ADA (Americans with Disabilities Act) compliance for websites has become a significant concern for businesses. The act mandates that businesses and organizations ensure their websites and digital content are accessible to individuals with disabilities. 

In recent years, a surge in lawsuits has emerged, with some consumers and attorneys filing suits against businesses for noncompliance. For example, niche industries, such as the funeral home sector, have been specifically targeted by attorneys for noncompliance. 

In addition to having third-party EPLI insurance, businesses should proactively make their websites compliant by following the Web Content Accessibility Guidelines (WCAG) 2.1, which outline specific criteria for ensuring website accessibility. This includes providing alternative text for images, ensuring appropriate color contrast, and making content accessible through keyboard navigation. There are several website plugins and services that can identify what components need to be adjusted and actively monitor the site to ensure it stays in compliance.

Fraudulent Claims: A Closer Look

Businesses today face not only legitimate claims but also fraudulent ones. For instance, in 2018 a New Jersey woman sued a pizzeria for allegedly finding a screw in her salad. An investigation by the pizzeria’s insurer revealed the woman had planted the screw herself, leading to the case’s dismissal.

Another example occurred in 2016 when a man sued a fast-food restaurant in Virginia, claiming to have found a dead mouse in his milkshake. However, surveillance footage and witness accounts proved that the man had inserted the mouse into the milkshake after purchasing it, resulting in the case being dropped.

As people continue to struggle to make ends meet, many will pursue the potential of easy money through false claims. Unfortunately, there are many attorneys willing to help them. 

Small Businesses Most Vulnerable

Large businesses are not the only ones at risk. Small and medium-sized enterprises are also susceptible to these predatory tactics. A lack of resources to mount a strong legal defense or settle claims makes them attractive targets for unscrupulous claimants and attorneys. The impact of such lawsuits can be devastating, underscoring the importance of robust risk management strategies and comprehensive insurance policies. 

Solopreneurs can be targeted as well, sometimes out of spite, anti-competitiveness, jealousy, or purely sadistic reasons even when monetary gain is not the objective. Reputation damage can be just as devastating to a solo business owners. Unfortunately, there’s little that can be done. 

In these situations, the best course of action for solopreneurs is often to maintain a noncombative stance, respond respectfully, and strive to resolve the issue professionally. 

While there may not be a foolproof way to avoid or resolve all such situations, adopting a professional and respectful approach can potentially help mitigate the impact and lead to a more favorable outcome.

The Customer Complaint Wave

The proliferation of social media platforms and online review sites has facilitated customers’ ability to voice complaints and, in some cases, file lawsuits against businesses. The American Bar Association reports that consumer complaints increased by 8.6% from 2019 to 2020.

A study by the Institute for Legal Reform revealed that U.S. businesses spend approximately $264 billion annually on litigation costs. 

According to a survey by Customer Care Measurement & Consulting LLC, dissatisfied complainers tell an average of seven people about their negative experience, whereas satisfied ones only tell 3.7 people.

The survey also suggested that consumers with complaints are looking for more than just refunds. Only 43% said they were satisfied with only a financial solution; 50% said they appreciated empathy, an apology, or other non-monetary outcomes; and 60% said they were more satisfied when they received both.

This increase in customer complaints and lawsuits necessitates a proactive approach to risk management. Businesses should invest in employee training and robust policies to prevent potential incidents that could lead to legal action. 

The Advantages of Customer Complaints

Fraudulent and legal ramifications aside, it is useful for companies to view legitimate customer complaints as a valuable step in moving your business to the next level.  

The National Customer Rage Survey estimates U.S. businesses are risking $887 billion in future revenue due to mediocre handling of customers’ complaints, up from $494 billion in 2020. The level of “customer rage” is holding steady at 63%. Nearly 1 in 5 Americans (17%) have personally behaved uncivilly during the past year.

Customer complaints often highlight areas needing improvement in your business, including product/service effectiveness and the overall buying experience. Armed with this knowledge, companies can better train sales and support staff, which will not only improve customer engagement but also potentially lead to more sales and referrals.

Online reviews influence the purchase of your brand more than you think. Consumers give more significance to your online reputation and posted reviews, which determines whether or not they purchase your products and services.

Responding to customers in a sincere manner is the first step in addressing concerns and diffusing negative situations. Addressing online reviews as soon as they appear is also important. Vigilantly monitoring reviews is critical to understanding how customers view your brand.

Navigating a Litigious Landscape

As businesses grapple with the rising number of employment-related lawsuits and customer grievances, investing in Employment Practices Liability Insurance, including third-party liability coverage, becomes a critical component of a risk management strategy. Businesses must remain aware of the ever-evolving legal landscape and take appropriate steps to minimize potential legal exposures and protect their financial stability and reputation.

By staying informed about current trends in employment practices, training employees on best practices, and investing in robust EPLI coverage, businesses can effectively navigate the challenges posed by a litigious environment and build a strong foundation for long-term success.

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