In this economy, one of the most frequent liabilities that small businesses are running up against are employment related charges and lawsuits.  In fact the EEOC recently announced that 93,277 workplace discrimination charges (wrongful termination, age, race and sexual discrimination, sexual harassment, retaliation, etc.) were filed in 2009.  These alone resulted in $376 million in monetary awards obtained for plaintiffs via enforcement, mediation and litigation.

But these are targeted towards big businesses, right?

Sorry to be the bearer bad news, but over 50% of these Employment Practices Liability charges are brought against smaller firms.  Furthermore only 1.2% of small businesses have EPLI (Employment Practices Liability Insurance) protection.  Here are some more facts on this disturbing trend:

•   81% of related charges are settled for an average of $22,400 to $40,500 even when the claim is found to be groundless! (I know it’s nauseating, but legal fees are not getting any cheaper).

•    Claims that go to trial cost over $180,000 on average.

•   A recent survey conducted by the Hartford indicates that 2 out of 3 business owners are concerned that employees might bring employment-related charges against them.

So what’s the good news?  The good news is that there are several carriers who are offering great coverage that will not only pay damages, but will pay for legal fees to defend as well as  providing front end legal advice that can be vital in heading off potential lawsuits.  Minimum premiums start at $450 a year.  Shoot us an email or call (512) 257-3773 to get a quote.

Please forward this to two of your colleagues that you like and hide it from the ones you don’t!  You can get more information by visiting Austin Insurance or Cedar Park Insurance .

And what can you reasonably do without?

In an ideal world entrepreneurs could afford a comprehensive insurance program that would protect you from any conceivable exposure. (I think this is the same world where you have unlimited funding, 48 hours in a day, and customers that would crawl over hot coals to buy from you)!

In case you’re not quite in that situation some important decisions have to be made. Make sure you make educated ones. Most companies that are bootstrapping don’t have the cash flow to transfer every risk via an insurance policy.  So what insurance coverage does a startup (or any business for that matter) really need?

That obviously depends on your business. We need to make sure you diagnose before you prescribe.  The first step is to start with an assessment of potential risks.  This process helps uncover a range of issues including regulatory compliance, risks associated with employees, potential third party liabilities, property risk, contractual risk, and threats to net income.

Once this assessment has been completed (and you’ve had a chance to practice some of those breathing exercises… you know… the ones that are supposed to calm you down and reduce your blood pressure) you can then, with the help of a Certified Insurance Counselor, make educated decisions that will help prioritize these exposures and help answer the following questions:
Which risks pose an immediate threat?

Which risks are the most likely to occur?

Which risks would be the most severe?

Which risks can we afford to retain or self insure?

Which risks can be reasonably be avoided?

Which ones can be mitigated or reduced?

Which ones can be transferred contractually?

What risks do I need to transfer via insurance?

Insurance is only one piece of managing risk and protecting your business.  Other avenues should be explored before blindly buying an insurance policy.

The good news is that getting professional help, (wait… that doesn’t sound quite right…), is available and in most cases costs no more than randomly buying insurance from someone over the internet.  For more information or to get a primer on types of business insurance available go to General Liability Insurance Austin.