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The NBA’s $10 million fine against Phoenix Suns owner Robert Sarver was the maximum allowed by the league and is doubtlessly the tip of the iceberg.

Critically, the Sarver case also underscores the value of a robust Employment Practices Liability Insurance policy, which covers the cost to defend and settle employment-related lawsuits.

Sarver was fined and suspended after an investigation found he used racial slurs, sexually harassed female employees, and bullied others. He also faces tens, if not hundreds, of millions of dollars in settlements and jury awards.

Employment Practices Insurance is more important than ever amid the #MeToo movement and increased media attention on workplace discrimination.

The NBA said its investigation found Sarver “engaged in conduct that clearly violated common workplace standards.”

Sarver said he will “accept the consequences of the league’s decision” and apologized for “words and actions that offended our employees,” though noted he disagreed with some of the report’s findings.

That won’t matter much, of course, to the plaintiffs’ lawyers who have already taken Sarver to court and others still planning to do so.

The #MeToo movement and increased media attention on workplace discrimination have led to a dizzying increase in employee claims against all types of businesses over the past several years. The average claim takes nearly a year to resolve and costs $160,000.

Insurance, in other words, can be critical to your business’s survival.

Employment Practices Liability Insurance, or EPLI, isn’t new, of course. Nearly half of the nation’s largest employers have an EPLI plan. But too few smaller employers don’t carry it and that leaves them dangerously exposed.

What does employment practices liability insurance cover?

EPLI covers your business against claims by employees that someone in the company has violated their civil rights. These claims include:

  • Discrimination based on age, disability, gender, national origin, race or religion.
  • Sexual harassment.
  • Wrongful termination.
  • Retaliation (taking negative actions against an employee because they report discriminatory practices).
  • Employment-related defamation.
  • Invasion of privacy.
  • Failure to promote.
  • Breach of employment contract.
  • Deprivation of a career opportunity.
  • Negligent evaluation.

Because coverage will differ based on carriers, it’s best to find an EPLI policy that will cover the cost to settle a case out of court, as well as defense costs if an employee lawsuit goes to court. The best EPLI policies will set limits for settlement but offer unlimited defense costs outside that limit. EPLI will cover those legal costs whether your company wins or loses in court.

Some EPLI policies also cover punitive damages – often the largest financial exposure presented by discrimination or harassment claims.

Also, as importantly, some policies even cover claims brought by customers, or that involve vendors, clients, independent contractors and leased employees.

The cost of EPLI

The cost of EPLI is influenced by several factors starting with the number of employees on your payroll. Other factors include:

  • Type of employees (full-time, part-time or seasonal).
  • Location (location in a state like New York or California can increase cost because these states offer more legal protection for employees).
  • Employee turnover rates.
  • Claims history.
  • Hiring/firing procedures.
  • Documentation of employee training and conduct.
  • Amount of coverage and size of deductible.

We hope it doesn’t need to be said, but EPLI is not a license to commit employment-related acts of harassment or discrimination. To prevent EPLI lawsuits, educate your managers and employees so that you minimize problems in the first place:

  • Create effective hiring and screening programs to avoid discrimination in hiring.
  • Post corporate policies throughout the workplace and place them in employee handbooks so policies are clear to everyone.
  • Show employees what steps to take if they are the object of sexual harassment or discrimination by a supervisor. Make sure supervisors know where the company stands on what behaviors are not permissible.
  • Document everything that occurs and the steps your company is taking to prevent and solve employee disputes.

According to the NBA’s investigation, Sarver wasn’t alone among Suns employees implicated in workplace misconduct instances it examined. The investigation also found the Suns’ HR department was historically ineffective and not a trusted resource for employees.

The good news is that HR at the Suns today has new leadership and that several important changes have been made, including the creation of a confidential hotline for reports of misconduct. The team also now has an investigation response team for conducting internal investigations, offers additional workplace training on key policies, and put into place a new parental leave policy.

The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.


This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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