Sunday, October 03, 1999

ENTREPRENEURS


Employers can guard against suits

BY JOHN ECKBERG
The Cincinnati Enquirer

        The potential for a lawsuit from an employee has become so likely for small businesses that insurance agent Ken Ludwig has begun protecting himself when company owners spurn his insurance pitch.

        When he is finished being perplexed, he suggests that the business owner initial a presentation to show that the company was offered coverage. When he returns to the office, Mr. Ludwig writes in his report that the company refused coverage. He wants nobody coming after him with a claim that he never brought it up.

        Mr. Ludwig is a committed believer in employment-practices liability insurance — and not just because he sells the stuff. He thinks that it ought to be as commonplace for small businesses as a cup of coffee because it can cost far less than a cup of coffee to make sure the company is covered.

        Despite the modest cost of as little as 12.5 cents per worker, Mr. Ludwig said, about 80 percent to 90 percent of small businesses decline the coverage. He scratches his head every time, particularly when employment-practices law is growing as fast as a new lawyer's Rolodex.

        “These days, you have to cross every "t' and dot every "i,'” Mr. Ludwig said. “Companies don't think they have the exposure. They say, "No, we're a close-knit group, we're family-owned and family-operated.' You can think of a million reasons not to do something. I look at them and say, "Oh, yeah. OK.'”

        Mr. Ludwig, an independent insurance agent at Smith-Feike-Minton Insurance Agency, which has a headquarters in Wilmington and a branch in Symmes Township, said a 25-employee company with proper policies and handbooks in place can be covered for as little as $1,142 annually.

        A policy that gives the company coverage up to $500,000 for legal bills and claims but has a $2,500 deductible and a clause where the company pays 10 percent of expenses costs $1,700 annually. The maximum a company can spend if an action is filed is capped at $25,000 a claim.

        “People think, "Man that's a lot of money,' but the average attorney fee to defend an Equal Employment Opportunity Commission claim is $18,000,” he said. “If it goes to a regular court, it's $100,000 in attorney fees.”

        A policy that pays up to $2 million for attorney fees and claims, a $25,000 deducible and 20 percent co-insurance capped at $25,000 would cost the owner of a 25-employee company about $1,976 annually.

        Coverage includes discrimination, sexual harassment, unlawful terminations and unlawful hiring practices.

        Mr. Ludwig thinks that lawsuits against companies over employment practices will not disappear anytime soon. “With downsizing and acquisitions, you're going to see more and more of these lawsuits,” he said.

        Jeff Barnes, assistant secretary and product manager for employment practices liability insurance for Cincinnati Insurance Co., said most companies compare employee practices liability insurance costs to their liability insurance bill, which is about $500 annually for some, and think that it's prohibitive.

        Attitudes are changing, he said. “At some point down the road, it will be staple coverage that most companies will recognize they have a need for,” Mr. Barnes said.

        John Eckberg cover small-business news for the Enquirer. Have a small-business question, concern or quandary? Call him at 768-8386 or e-mail him at jeckberg@enquirer.com, and he will find the expert with the answers.

       



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