How Much Does an Employee Charge of Discrimination Cost?

December 2015
By Richard H. Wessels, Esq.

A most interesting study was released recently by Hiscox, Ltd, a prestigious worldwide specialty risk insurer and an underwriter at Lloyds of London. Interestingly, among the risks covered are kidnapping and ransom, aerospace, political risk and fine art. The Hiscox study showed that in the US, the average cost of defense and settlement of an employee charge of discrimination is $125,000. The study focused on 446 claims reported by small and medium-sized businesses with fewer than 500 employees. Here are some of the key highlights from the study:

• The average duration of an employment matter from start to finish was 275 days.
• The average cost of both defense and settlement was $125,000.
• The average self-insured retention deductible for companies with employment practices liability insurance was $35,000.
• Only 19% of the matters resulted in both defense costs and a settlement payment. That means that 81% of the charges (or about 4 out of 5) were nuisance suits that did not result in any settlement.
•  The median judgment for employment matters that ended up in court and resulted in a finding of liability was $200,000 in addition to defense costs.

As you can see, employment litigation can be expensive, even if the employer wins. The best advice is to work proactively to prevent problems from occurring in the first place. The reality, as we see it, is that prevention is the most effective strategy for avoiding the potential huge costs of employment claims.

Questions? Contact Richard Wessels in our St. Charles office at (630) 377-1554 or riwessels@wesselssherman.com.