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Last week we discussed the case of Christ Academy v. Hermes Sargent Bates and learned the many risks of having an underinsured client. (You can read the post here if you missed it.)

Many employers think they are not at risk of a discrimination lawsuit because their employees “would never do that.” This case illustrates, that no employer, no matter how moral, just or innocent, is exempt from the damages and havoc that accompany such a suit.  Yet, many employers choose to forego or limit this important form of insurance coverage.  When it comes to a lawsuits, even a successful defense can result in a major loss.   

With only a $100,000 limit of employment practices liability insurance, Christ Academy was woefully underinsured.  Employment practices liability insurance is the only type of policy that will cover employment related lawsuits alleging violation of employment laws involving discrimination, harassment, reasonable accommodations and wages. These types of claims are specifically excluded from general liability and workers compensation policies. Sometimes a modest amount of coverage (e.g. $10,000 or $100,000) will be automatically added to a Directors & Officers insurance policy or a general liability policy.  However, when an insurance company exhausts the limits of coverage, they are “outta there.”  Once the limit of insurance covering damages and/or claims expenses is met, the insurance company is no longer under any obligation to defend the claim and the insured entity is on it’s own.  

As this case illustrates, a limit of at least $1,000,000 in employment practices liability insurance would have protected both Christ Academy and its law firm.  Attorneys that represent private or non-profit corporations would be wise to recommend that their clients have their insurance coverage reviewed by a reputable and qualified insurance broker.  

To learn more about employment practices liability insurance, contact our office at info@intelisure.com or (800-242-7250).  Travelers insurance, a leading provider of employment practices liability insurance provides a fun and interactive tour of sample employment related claims scenarios here:  http://u4easerv.com/travelers/wrap/wrap1/front.html.  

by Louise M. Paglen, Esq.
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