Discrimination Insurance for Small Businesses

July 12, 2019

three black birds excluding one white birdWhat is discrimination insurance?

Mainly known as third-party EPLI, discrimination insurance helps defray the cost of lawsuits and judgments brought against your business by customers (or other third parties) claiming discriminatory or harassing behavior. By the way, the technical term for this coverage is not “discrimination insurance;” we’re using it here just to keep things simple.

Doesn’t my CGL or business owner’s policy (BOP) cover these kinds of claims?

No. Suits for discrimination DO NOT fall into any of the categories (bodily injury, property damage, or personal injury) included in your CGL or standard business owner’s policy.

Some business owners *may* have protection as a part of their employment practices liability (EPLI) coverage. And when it comes to their employees, they probably do.

That’s because EPLI insurance is designed to respond to claims, made by company workers, alleging some violation of civil rights. Workers’ claims may include allegations of sexual harassment, wrongful termination, discriminatory hiring practices, and more. (Does your business have protection against these kinds of employee lawsuits?)

Meanwhile, what about third parties? Third parties could include your customers, prospective customers, freelance contractors, or vendors. Increasingly, people in these groups are filing civil lawsuits against businesses of all sizes. And most, unfortunately, aren’t covered by current insurance plans.

Wait, customers can sue my business for discrimination?

In a word, yes. The Massachusetts Public Accommodation Law prohibits business owners from making any distinction, discrimination, restriction in admission, or unfair treatment in a place of public accommodation based on race, color, religious creed, national origin, sex, gender identity, sexual orientation, deafness, blindness, or any physical or mental disability, or ancestry.

So if your business is considered a place of public accommodation, then yes, you may have a gap in your business insurance program.

What is a “place of public accommodation?”

According to Mass.gov, a place of public accommodation is defined as “any place… which is open to… the general public.” Business websites are now considered “places of public accommodation,” according to Title III of the Americans with Disabilities Act.

Does my business fall into this category?

Mass.gov offers some of the following categories as examples. This list is not comprehensive, but as you can see, it covers most types of businesses:

  • Hotels, inns, motels
  • Restaurants and bars
  • Stores and shopping centers
  • Healthcare facilities and doctors’ offices
  • Gyms and health clubs, childcare centers
  • Professional services companies

What are some examples of discrimination against customers or other third parties?

Maybe a customer in a wheelchair cannot access your building entrance because there is no ramp. Or what if your employees make inappropriate comments about the physical appearance of a freelance contractor? Having a business website that is not ADA compliant can also create a discrimination exposure. More on ADA compliance for business websites below…

Who needs discrimination insurance?

We often hear about suits against national companies like Starbucks, Target, or Wal-Mart. But the big guys aren’t the only ones susceptible to discrimination claims. A Portland, Maine restaurant recently settled a discrimination claim after an extended legal battle. One of its customers claimed she experienced racial discrimination and poor treatment by the waitstaff.

Third-party discrimination risks are becoming so significant, the VP of Technical Affairs at the Massachusetts Association of Insurance Agents recently made the following EPLI recommendation:

“…any business that interacts with “the public” needs to buy EPLI that includes Third-Party Discrimination coverage.”

The experts at Risk Management Monitor  went a step further. Their recommendation includes purchasing third-party EPLI and implementing discrimination training:

“While third-party EPLI helps defray the cost of lawsuits and judgments brought against your business, one thing it doesn’t protect is your reputation. Therefore, forward-thinking employers are doing more than just purchasing a third-party EPLI policy; they’re also taking steps to make it less likely they will have to use that policy. Effective training and education, no matter your level of exposure, can help prevent claims of wrongful acts against your business or employees. Creating training programs to educate employees on what constitutes harassment and discrimination, as well as putting processes in place about what to do in the event of an allegation, are good starting points.”

How do I purchase discrimination insurance?

Some EPLI policies include third-party coverage automatically. If yours doesn’t, coverage for third-party claims can often be added.  (Although some carriers won’t write EPLI for business types they deem higher risk–e.g. casinos, clubs.) Don’t yet have an EPLI policy yet? Uh oh. Let’s back up for a second, then. Here’s why you need EPLI

Some carriers exclude website compliance from their third-party EPLI. In these cases, however, carriers may carve back some defense costs to help defend you until necessary website modifications are made.

If all of this sounds confusing, that’s because it’s difficult to generalize the facts across all carriers and business types. Your best bet is to contact an agent and see how coverage can be modified to fit your specific needs.

How can I ensure my business website is ADA compliant?

Here is a GREAT resource on why and how you should make your business website accessible to people with disabilities. If you don’t have time to read it right now, some of the key takeaways from this article are:

  • 2018 was a record year for ADA website compliance lawsuits. Suits are being filed against major corporations and small business alike.
  • Settlements on ADA website compliance typically range from $5,000 to $50,000.
  • The main goal is to make it possible for visitors with visual, hearing, or other disabilities to use and enjoy your website. If, for example, you have loads of videos on your website and none include closed captioning, some visitors will have trouble accessing that content. Ditto for table data or important images without any alt text.
  • Don’t pay someone to “audit” your business website for ADA compliance unless they are also going to help you fix it. Even then, it shouldn’t cost thousands. And you can often make a few simple fixes yourself.
  • Doing something is better than doing nothing. Start with small tweaks you can tackle yourself. Taking small steps may even help your case if you are ever charged with noncompliance.

If you’d like to learn more about protecting your company against discrimination claims, please contact our business insurance team (super knowledgeable, friendly folks) at 508.339.2951 or info@candsins.com.