Claim Scenario: Employment Practices Liability Insurance

Our restoration contractor clients will often ask us why they should consider employment practices liability insurance. We just had a recent claim come up for one of the contractor clients that we feel highlights the need for this insurance even in situations where your company is not at fault:

The Scenario: One of our restoration companies had an employee that was 62 years and had worked at the company for over ten years. Over the past several years, this employee's work performance had begun to significantly decline to the point where the restoration company had received several complaints from clients and other coworkers. The employer decided to terminate the employee in response to the last protest. The restoration company then hired a much younger (29 years old) replacement employee. The ex-employee then filed a charge with the EEOC alleging that the termination was based strictly upon his age.

The Risk Factors: While the restoration company had more than enough reasons to terminate the employee based on his performance, many issues were not appropriately documented. This left the contractor with little evidence to refute the complaint that originated from the former employee.

The Result: The EEOC issued a Right to Sue Letter, and the employee filed a suit in federal court. As a result of the incident, the restoration company was forced to settle the matter for $150,000 plus an additional $100,000 in defense costs.

The Takeaway: While this contractor wasn't necessarily at fault, they left with a significant fine and defense costs. Thankfully, the contractor had insurance to protect them from the issued court settlement and had their defense costs paid for by the insurance company.

If you have any questions on how employment practices liability insurance can protect your company, please feel free to contact our office.