Many small and mid-sized businesses
lack EPLI coverage

Although the EPLI market provides some $1.2 billion in premium, it is far smaller than it should be, according to data compiled by MarketStance, Middletown, Connecticut. The data show that only 1.2% of the small commercial enterprises have EPLI coverage and only 30.7% of the middle market firms have EPLI coverage. National accounts appear to have adequate coverage.

There are some 6.7 million small commercial businesses in the United States, but only 80,000 of them are covered by EPLI, accounting for some $90 million in premium. Of the 240,000 middle market accounts, only 73,800 have EPLI coverage, accounting for $398 million in premium. The national accounts spend some $735 million on EPLI premiums.

Considering the growing reliance on lawsuits to settle differences, the choice to “go bare” would seem to be foolhardy at best. A report in Small Business Review notes that there were more than 75,000 employment discrimination charges filed with the EEOC in 2006 and that number could grow in today’s economic climate where unemployment is expected to surpass 10%. Some of those people who find themselves out of work may very well resort to an allegation of discrimination.

There have been cases where suits alleging wrongful termination or sexual harassment have been filed months after an employee has been terminated as money gets tight and the terminated employee looks around for a way out from under his or her growing debt.

The average award in employ­ment practice cases is more than $200,000. However, even more telling, is the fact that litigation costs, even if the courts determine that there was no wrongdoing, can exceed $100,000 in cases where there is a single plaintiff and several million dollars if there is a class action claim. Without EPLI coverage, the litigation costs could seriously impair or bankrupt a company.

Extrapolating the results if all small and medium sized businesses carried EPLI coverage, it would produce additional premiums of $8 billion. That’s not a bad chunk of change.