Small businesses face employment risks.

While 90% of small-business owners said employment practice liability was an important coverage, only half said they would consider such a policy when comparing two policies, one with EPLI and one without, according to a survey by Hartford Steam Boiler Inspection and Insurance.

"We need to overcome the long traditional view in the industry, and among small businesses, that EPLI is expensive and cumbersome," said Jeff O'Shaughnessy, assistant vice president of strategic products, for HSB. "We found the survey to be enlightening and confirming what we believe to be true, which is this is a very real issue for small-business owners. However, in the insurance marketplace, it is a need that has gone underserved. The vast majority of small businesses does not have EPLI coverage. If a product is properly positioned for this segment, it appears there is great demand."

HSB, a speciality reinsurer and author of the study, provides EPLI coverage to its primary writers' small-business clients as part of a commercial insurance package.

According to the survey, 92% of small businesses said that they might face an employer/employee legal issue, no matter how carefully they manage their business. About 60% of respondents said that discrimination was the greatest risk for all EPLI issues.

According to the U.S. Equal Employment Opportunity Commission, sexual discrimination cases represented nearly 47% of the cases the EEOC handled in fiscal year 2005.

But even cases that are found groundless can still cost small businesses thousands of dollars in litigation costs, O'Shaughnessy said.

"If you look at the statistics, the vast majority of claims settle for between $25,000 and $40,000," O'Shaughnessy said. "If you are a small-business owner, a $1 million limit, which is generally the standard for the policy, is too much insurance. And you are going to pay for it."

HSB's EPLI product has limits of $25,000 to $250,000, and is not a stand-alone policy.

Sexual Discrimination
Cases Most Common

Of the lawsuits that the Equal
Employment Opportunity Commission
filed in fiscal year 2005,
sexual discrimination was the
most common claim.

                        Percentage of
Claim                        Lawsuits

Sexual discrimination           46.9%
Retaliation                     35.8%
Race                            21.1%
Disability                      12.8%
Age                             11.2%
National origin                  7.8%
Religion                         3.9%
Equal pay                        3.4%

Source: The Equal Employment Opportunity
Commission