Hiscox Study Reveals Riskiest States for Employee Lawsuits
Employee charges most likely in New Mexico, Washington, D.C., Nevada, Alabama and California
NEW YORK, October 27, 2015 – A new study of employment practices litigation by Hiscox, the global specialist insurer, found New Mexico, Washington, D.C., Nevada, Alabama and California as the top states (or district) for employee lawsuit risk in the U.S. Businesses in these markets face a substantially higher risk of being sued by their employees when compared to the national average. According to the study, US-based companies have at least an 11.7% chance of having an employment charge filed against them.
The 2015 Hiscox Guide to Employee Lawsuits report uncovers the impact of employee charges and litigation on small- and medium-sized businesses and organizations with less than 500 employees, including defense costs and settlements. The report was compiled using the latest data on employment charge activity from the Equal Employment Opportunity Commission (EEOC) and its state counterparts across the US.
Worst States for Lawsuits
Companies based in New Mexico face the greatest risk nationwide, with a 66% higher chance of facing an employee charge than the national average. Other states and jurisdictions where employers are at a high risk of employee charges include Washington, D.C. (65% above the national average), Nevada (47%), Alabama (41%), California (40%), Mississippi (39%), Delaware (35%), Illinois (34%), Arkansas (22%) and Tennessee (20%).
“State laws can have a significant impact on the risk businesses face from employee charges and contribute to the variation in charges seen around the country,” said Bertrand Spunberg, Practice Leader – Executive Risks at Hiscox USA. “Many of the higher-risk states observed in the study have laws that go beyond US federal guidelines, creating additional obligations and risks for employers. It is important for companies, especially those operating in these high-risk markets, to be keenly attuned to any legal developments that may affect their exposures.”
The Cost of Employee Lawsuits
Hiscox claims data for small and mid-sized businesses (under 500 employees) indicate that one in five will face employment charges with an average cost to defend of $125,000, which includes expenses such as attorney’s fees and settlement costs. For those that did have insurance coverage, the average deductible cost was only $35,000, compared to the $90,000 balance paid out by their insurance company. The median judgment for cases that go to trial is approximately $200,000 for employment lawsuits adjudicated by the courts, while one-in-four cases resulted in a judgment of $500,000 or more. 1
“Prevention is the best defense against lawsuits,” said Spunberg. “Simple preventative and mitigation measures such as having written hiring procedures, an up-to-date employee handbook and proper training for employees on workplace discrimination and harassment are essential to minimizing risk and protecting your business.”
In the US, Hiscox provides Executive Risk insurance coverage, including Employer Practices Liability Insurance, along with a diverse portfolio of professional liability and other commercial insurance to US businesses. Hiscox has offices in New York, NY; Atlanta, GA; Chicago, IL; Los Angeles, CA; San Francisco, CA and White Plains, NY.
About the Hiscox Study:
The Hiscox study analyzed recent employment discrimination charge receipts by state at the federal and state commission levels and focused on establishments with more than 10 employees in each state or jurisdiction. Charge frequency was determined by the number of charges divided by the number of establishments with more than ten employees. To compare the states, Hiscox analyzed credibility-weighted frequency relativities and compared each state to the countrywide average. The results are based on the frequency of charge receipts, but the receipt of a claim is not limited to only those claims that result in a settlement or other meritorious resolution.
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About Hiscox in the U.S. Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). There are three main underwriting parts of the Group – Hiscox London Market, Hiscox UK and Europe and Hiscox International. Hiscox International includes operations in Bermuda, Guernsey and the USA. Hiscox Syndicates Ltd is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. The ability of syndicates at Lloyd's to do business in the USA and its territories is restricted as they are not US-based insurers. Hiscox Underwriting Limited and Hiscox ASM Limited are authorized and regulated by the Financial Conduct Authority.
Hiscox Inc., a Delaware corporation headquartered in New York, d/b/a Hiscox Insurance Agency in CA, is a licensed insurance intermediary for admitted and surplus lines business. Hiscox Inc. underwrites on behalf of, and places business with, Hiscox Insurance Company Inc., other domestic insurers, and syndicates at Lloyd's (www.lloyds.com). Hiscox Insurance Company Inc. is a Chicago, IL domiciled insurer which is admitted or licensed to do business in all 50 states and the District of Columbia. The publication and delivery of this information is not intended to be a solicitation by Lloyd’s for the purchase of insurance by any US risk.