Friday, June 28, 2013

The Kick Me Prank and What It Can Cost Your Business

The importance of business insurance, in its various forms, is apparent to most business owners. They study the nature of their businesses and the risks that exist and then take the insurance policies that they think offer them the kind of protection they need. But insurance is a complex subject and it is easy to overlook issues and leave the owner and the business exposed to needless risk. Employment practices insurance and legal defense coverage are cases in point. Many businesses either do not realize the risk that they face or undervalue the importance of the exposure they are accepting.

Even with the best of intentions, a small business owner cannot control every aspect of his employees’ behavior while they are at work. Issues such as sexual harassment, discrimination and so on can arise out of thoughtless acts or because of a misinterpretation of an innocent action or words.

Issues like wrongful termination or the failure to provide benefits are easy to raise and difficult to defend. All it takes is one uninformed employee or a vicious one to cause chaos that will carry a hefty price tag. One misguided employee causing pain or suffering to another can land you, the business owner, in the soup. The recent case of the INTEL plant in New Mexico is a good example of this.

Some employees taped a “Kick Me” sign to the back of another employee and then kicked him while others who were watching laughed. The employee went to his supervisor who, on seeing the sign, decided to join in the “fun” and also kicked him. A few more then joined in before the sign was finally removed. The employee suffered severe mental and emotional trauma and has filed a lawsuit of damages as well as attorney’s fees.

This kind of behavior has never been encouraged by INTEL and the employees, for the most part it appears, thought of it a harmless fun and a good prank. But it misfired and the one left holding the baby is the employer. Many of those who participated in the “prank” lost their jobs, but the lawsuit remains and while the damages claimed are not being specified, it could potentially cost the company millions of dollars.

As a small business owner, you may think you know your employees well and are certain that they will not behave in a manner that could cause you problems. But all it takes is one off day, caused by anything from a fight with a spouse to a fender bender on the way to work or anything else beyond your control, and the otherwise well behaved employee could, because of a bad mood, become a huge financial liability.

A lawsuit for damages that are not covered by your existing business insurance policies can ruin you financially and result in the loss of the business.

The cost of this essential extra coverage for a small company with about 15 employees is not
high at around $3,000 per year. As a business owner you will naturally have to consider the
requirement of such expenditure.  But how do you assess people’s moods and attitudes? Even the best behaved of people can indulge in a thoughtless or hurtful act and if it happens in the workplace, you will be the one who has to pay any damages that may be awarded.

If your business does not have employment practices insurance and legal defense coverage, the best thing to do is to talk to an insurance broker to understand the nature of the risks that will be covered, the cost and the benefits that such protection offers. All it takes is one thoughtless gesture or misinterpreted action to create a huge potential liability.

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