A white envelope with blue lettering labeled “Equal Employment Opportunity Commission” lay on my desk.

Inside the envelope was a notification from the EEOC that a former employee was accusing our organization of discrimination. The employee, who was a man, claimed that his boss, who was also a man, terminated him because he is a man. I let that sink in and muttered to myself, “So he thinks his boss, who is a dude, fired him because he is a dude. He’s either angry and doing this out of spite, or he’s not very bright.”

Then I picked up the phone and called our directors and officers’ insurance carrier. Commonly known as D&O insurance, helps pay for the legal defense, settlements or judgments from lawsuits or administrative claims against a nonprofit. But not all D&O insurance includes employment practices liability (EPL) coverage – so you always want to confirm that you have this coverage before any claim is made.

The insurer confirmed that our D&O insurance included Employment Practices Liability insurance, and they opened an insurance claim, assigned an adjuster and got to work on our behalf.

The Benefit of EPL Insurance

Because we had EPL coverage, the insurance company engaged and paid for the services of an established law firm that specializes in insurance defense for employment-related cases. The lawyers worked with our HR and the manager to respond to the EEOC – eventually putting together a three-inch document that demonstrated the employee was terminated for cause, our nonprofit adhered to its equal employment policies (which were fully compliant with Federal law) and had a history of training all managers and staff about our equal opportunity policies.

About six months after submitting this response, the EEOC informed us that they found no reason to move the charge forward. The matter was dropped, and we never heard from the former employee again.

We paid a relatively small insurance retention of about $3,000, which is sort of like a deductible. Without insurance, the same legal defense would have cost us well over $25,000 and a lawsuit would have cost significantly more.

Are you ready for an employee claim, charge or lawsuit?

If you think a claim won’t be made against your organization, keep in mind that any employee or former employee can make a claim or file a lawsuit against your organization for any reason. They can do this without any initial evidence, and your organization will be required to defend itself. In fact, in 2018, the EEOC received over 100,000 claims of discrimination, retaliation, harassment and equal pay.

Let me be clear that many of the charges filed with the EEOC are completely legitimate, and the employee or former employee is seeking redress for being wronged. If you have a legitimate claim from an employee, the attorneys hired by your EPL insurance could help negotiate and structure a settlement, and your coverage will likely help pay the settlement.

But what will you do if there is a letter on your desk today from the EEOC (or notification that a former employee is suing you)? Assuming that you believe your organization, abides by federal law and does not tolerate discrimination, harassment, or failure to pay equal wages, would your organization be prepared to shoulder the legal cost of defending itself? What if your HR records aren’t great, and your legal bills rise to over $100,000?

Employment practices liability insurance is a relatively inexpensive “add on” to your Directors and Officers Insurance. It’s easy to find out if you have EPL coverage by asking your broker, and it’s also a good idea to ask about your total coverage. It’s important to understand what types of claims are covered, coverage limits, whether the policy is on a claims made or occurrence basis, and your retention (which can best be described as insurance jargon for your deductible).

Do this today!

Don’t assume that your insurance policy will cover you – – – check your policy documents today and ask your broker if you have any questions. Send your broker an email right now – a few minutes today could save your organization a lot of money and heartache next month. When you speak with your broker be certain to ask FindLaw’s 7 Questions about your coverage as well as these additional questions that the Mintz law firm created.

 

Quick Note: I am not an insurance broker, nor am I an attorney. This blog post is for informational purposes only and should not be relied on for legal counsel or insurance advice. If the post sparks questions, then reach out to a licensed, qualified professional.