Pricey Insurance Offers Last Stop

Recently, Northwest Arkansas company leaders have seen some peers lose painful battles with employees who filed claims with the U.S. Equal Employment Opportunity Commission.

Last August, Landers Auto Sales Inc., part of the United Auto Group, settled an Americans with Disabilities Act-related lawsuit with former sales manager Steven Hart. To avoid a trial with Hart, a quadriplegic, Landers Auto Sales gave him $160,000 in cash, $30,000 for attorney fees and a wheelchair-accessible van worth more than $30,000.

According to EEOC documents, between July 26, 1992, and March 31, 2000, the commission obtained more than $300 million on behalf of about 20,000 individuals with ADA claims. The EEOC regularly sues companies for failing to meet federal requirements for employee treatment. Claims pertaining to the rules outlined in the ADA, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act and the Equal Pay Act are all pursued by the EEOC.

In February, Global Material Services of Pine Bluff agreed to pay about $300,000 to settle a sexual harassment lawsuit filed with EEOC by three female employees, according to The Bureau of National Affairs Inc.

With these and other costly examples in mind, area business leaders are taking more steps to prevent employee suits, said Shawn Daniels, a Fayetteville lawyer.

“Even small employers are actively trying to prevent legal battles,” Daniels said.

Obvious preventatives include an employee-signed, lawyer-approved company handbook that is filled with up-to-date employee policies and procedures.

However, if a lawsuit does happen, there is a fail-safe lever to keep companies from taking the full punch of an expensive verdict or settlement.

Many commercial lines of insurance include employment practices liability insurance. The policy can be written to cover a range of costs risked in an employee litigation case, including attorney fees, court costs and damages.

“[EPLI] is a coverage that employers don’t want their employees to know they have,” said Gray Holden, a representative of the Chubb Group of Insurance Companies. From his office in Tulsa, Holden manages executive notation, including EPLI coverage, for Arkansas and Oklahoma.

Donna Easley is a marketing representative for Farris Insurance Co. in Springdale. With 15 years in the business, she said she’s surprised that more companies don’t carry EPLI. Easley estimated that Farris maintains only about 10 policies per year.

She said business owners often ask for quotes about EPLI coverage, but they don’t follow up with a purchase. Holden estimated that only 10-15 percent of Chubb’s national commercial client base has some form of EPLI.

Cost is a major deterrent for businesses. The price of EPLI depends on factors such as the company’s legal history, safety record, number of employees and rate of turnover. Most policies also require businesses to have a lawyer-approved handbook.

Easley said a company that employs fewer than 100 people and offers moderate risk to the carrier could pay $3,000-$4,000 annually for EPLI. A majority of the companies that pay for EPLI purchase $1 million policies, she said, and the deductible usually ranges between $5,000 and $10,000.