Just when I think I can stop writing about the need for all dealers to carry "Employment Related Practices (ERP or EPL)" insurance, I get a surprise. In February I spoke to a Twenty Group where three out of fifteen dealers apparently did not carry this coverage. With as much press as employee lawsuits have received, I was dumfounded.
Coincidentally, the lead-in article of the March 8 issue of Business Insurance was titled "Size of jury awards up, fueled by EPL claims." I would like to use some facts from this article (quoting a study from Jury Verdict Research) to make my case once again. The article (which compares 1996 to 1997 and 1991 to 1997) states that jury awards for all forms of personal injury cases increased 15%, while the jump in discrimination and sexual harassment claims from 1996 to 1997 was 286%. Is that enough to get your attention? It got mine!
Here are a few more eye-popping numbers for you. The report states that the average compensatory award for these claims is $250,000. In addition to this amount, punitive damages were awarded in 34% of the discrimination cases and in 38% of the harassment cases. The average punitive damage awards were on average an additional $117,000 and $100,000 respectively. Suits filed for wrongful termination/constructive discharge were on average awarded $162,000 and the average punitive damage was about $250,000. In many states the insurer by law cannot pay punitive damages. To put all this in another light, medical malpractice compensatory awards rose only 10%, and punitive damages decreased by more than half.
So what does all this mean for you, the dealer? This study merely confirms what I have been saying for years in this magazine-that discrimination and sexual harassment lawsuits are a "growth industry." Now, it is true that most dealer specialty carriers offer this coverage, and the majority of dealers buy it. It should not be considered optional. We do see some agents suggesting that policy limits of $250,000 are adequate. As you can see, this would only cover the "average claim," and that is not enough. Some carriers provide coverage up to your umbrella limits. That is optimal. When I do see this type of coverage missing, it usually indicates that coverage is provided by an agent/broker not working with a dealer specialty insurer. When it is quoted on a stand-alone basis, the cost for this coverage may seem high. The cost is high because the consequences can be high.
One associated area of possible lawsuits I mentioned some time ago was discrimination, harassment, and personal injury to non-employees. In the last six months we have seen an increase of these types of claims. In one instance, the specifics of a bad credit report were revealed to the father of a young man's fiancé and the wedding was called off. In another instance, a female customer was harassed by a shop crew after nude pictures of the woman were found in, and taken from, the woman's car. Both cases were settled for under $50,000. We expect to see more cases like these as the law expands and lawyers need new frontiers. Be certain your coverage extends to these types of possible claims.
A final note for dealers who have had discrimination, harassment, or personal injury claims: Just this month a dealer specialty company did what I consider to be unconscionable. They renewed the dealer's coverage but excluded the ERP coverage with only a few days notice. There was not enough time to get a stand-alone quote, but fortunately another carrier was there to write the entire package. One caveat-there was an almost 100% price increase, but the dealer was stuck because of the lack of time. This carrier preaches loyalty like there was no tomorrow, but when they were asked to extend the coverage to give the dealer time to get the coverage elsewhere, the dealer learned that loyalty runs only one way and it's not in the dealer's direction.
Roger Beery is President of Austin Consulting Group, Inc., a firm specializing in dealer insurance consultation. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3. rbeery@dealeronline.com