I am lucky enough to work with some extremely fantastic local businesses in Colorado. Our team works on all sorts of employment issues to help these companies avoid liability and maintain compliance. And these days, with the amount of employment laws that have been recently implemented in Colorado, there is no end of work to be done to ensure compliance.
Still, I have noticed that there is one critical, but undesirable, area that gets ignored — insurance. Particularly, what does your company’s insurance cover? Do you know what categories of damages it covers? Most business owners know if their insurance covers property damage or a customer slip-and-fall. Fewer owners know whether their insurance coverage stretches far enough to cover discrimination cases by current or former employees.
Cases brought by former or current employees against their employers are on the rise. The Colorado Civil Rights Division (“CCRD”), which investigates claims of discrimination, saw 947 employment charges filed in 2019, and then 1137 cases filed in 2023, a large increase.[1]
An employee who wishes to file a lawsuit against their employer based on discrimination must first file a claim with the CCRD. If the CCRD makes a finding of no probable cause, then the employee may file the lawsuit. Too often, companies find out too late that their business insurance does not provide coverage for discrimination claims made by employees. This means that those companies are faced with the choice of either paying the employee what they ask for, out-of-pocket, even if the employer is confident that no discrimination occurred or pay outrageous sums to defend themselves in court.
How can you avoid this undesirable outcome?
Employment practices liability insurance (“EPLI”). EPLI provides coverage for employers to help pay for the legal costs associated with defending themselves against a claim by an employee alleging discrimination based on race, sex, age, wrongful termination, or harassment. It will pay to settle claims against your business as well as your defense costs. It’s a critical, but often overlooked, component of a small business insurance policy.
This insurance is even more critical for small businesses, who are more likely to face these types of claims. While larger companies have robust human resources offices and practices, a small business may not have the resources to have such practices, and therefore, is more likely to be sued. Before you face a lawsuit of your own, reach out to your broker and confirm that your policy contains EPLI. If not, add it. And don’t hesitate to reach out to Milgrom & Daskam with any question related to EPLI or other employment matters.
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[1] FINAL TO POST 4-14-23- Colorado Civil Rights Commission Annual Report.docx.pdf – Google Drive; CCRD-2023AnnualReport.pdf – Google Drive.
