An agent's primary selling point for hammering away at reluctant employment practices liability insurance prospects is succinctly summarized by Kristina Mason, management liability broker and marketing and corporate communications manager for wholesaler Worldwide Facilities in Los Angeles: “As a business owner, you don't have to do anything wrong,” she said. “Someone just has to say you did.”

It would be hard to improve upon Mason's maxim. For the past 15 years or so, there has been no shortage of employees, former employees and non-employees willing to “say you did.” Recently, however, employment practices claims have been really coming into their own: Instead of griping about the boss around the water cooler, more folks now do their complaining at the local EEOC office.
Why? Because they can. “Word has gotten around that you can probably get a settlement for very little effort,” Mason said.
“Business is keeping us busy, let's put it that way,” agreed Carrie Brodzinski, management liability products manager for Beazley Group plc in Farmington, Conn.
That being the case, now is definitely the time for independent agents and brokers to actively promote EPLI to clients large and small. Failure to do so in the current environment is poorly serving not only your client but yourself, and in more ways than one. EPLI is a growth industry. Are you missing the boat?
A going concern
EEOC claims today are at their highest volume since 2002, and each charge category–discrimination, harassment, retaliation, etc.–has gone up by double digits since 2006, “which is really rare,” said Cathy Padalino, EPL product manager and vice president for Chubb Specialty Insurance in Warren, N.J. The monetary relief figure for 2007 was $345 milllion, up 26 percent over 2006. “We talk about EPL as having the frequency of workers' comp but the severity of D&O, all in one coverage,” Padalino said.
Win or lose, each of those claims maturing past the initial filing costs someone money. The cost of defense alone now averages $125,000, according to Pamela Ritz, president of Specialty Risk Management in Austin, Texas. The average jury award is $200,000, and employees win two of every three cases that make it to trial. And that's just the federal EEOC–plenty of claims are brought at the state and local levels, which are notoriously employee-friendly.
It's not a question of if you're sued, but when, Padalino said. A Chubb survey of private company executives indicated that one in three firms has experienced an EPL-related event in the past five years. As the size of the company grows, so does the likelihood of a claim or lawsuit: 80 percent of companies with 500 or more employees had an EPL event in the past five years, although only one in three bought an EPL policy. Of those surveyed with claims, 34 percent reported costs of between $11,000 and $300,000, with an average cost of $74,400.
Even if the employer is completely without fault, “it'll cost you a lot to prove it,” said Elena Ryzhkina, an underwriter for ProWest Insurance Services Inc. in Folsom, Calif. Guy Knapp, ProWest president, recalled a recent case where “we spent over $100,000 defending the insured, proving that everything we did was right. We won, but it cost us $100,000 for the privilege of winning.”
It'll never happen to me
With the stakes so high, selling EPL–a fairly affordable coverage, given the exposure–should be a laydown, right? Well, yes and no. There are certainly more people, including very small businesses, buying it now than before. “Business is booming, and it's been growing ever since the product was first introduced,” said Lana Miller, managing director of the Financial Risk Group Practice for AmWINS in Los Angeles. But given Americans' neverending love affair with suing the pants off anyone within reach, “more” really needs to be “everyone.”
There are problems at both ends of the sales spectrum. The largest employers grasp the growing need for EPLI, but have more options for managing the risks that don't necessarily include a comprehensive insurance program. In dealing with smaller clients ranging from companies with two to 2,000 employees, agents sometimes face a double obstacle: getting them to truly comprehend the exposure and then convincing them to purchase insurance when they do. “Our true competition in EPL is the nonbuyer,” Cathy Padalino said.