ABA Provider- Are you overlooking a crucial exposure?

This article was originally published on LinkedIn by Daniel Whallon, CLCS.

About a year and half ago, I got a phone call from the owners of a mid-sized ABA provider in Southern California. They were referred to us by a client who offers practice management software and solutions to ABA companies.

Like many people who are referred to us, these owners had a big problem. They had been paying through the roof for their insurance to adequately protect their business and to maintain vital contracts. They carried virtually every coverage under the sun and were paying premiums in the six figures. You can imagine their frustration to learn that they recently had a claim that wasn’t covered by one of their policies. They paid so much in premium, how was this even possible?

Rewind 6 years prior to this call, when the problem arose unbeknownst to them. One of their therapists had been skipping her lunch and working through it, even though state law requires employees working 5 hours take at least a 30 minute lunch break. While the owners assumed all their employees were taking their lunch, this employee wasn’t and the employer had no way to track when she was on or off the clock.

When this employee left the company, she hired an attorney and went after her employer for the lunches she worked through as overtime for 6 years. They turned in the claim to all their various insurances, but ultimately the claim was denied. Why?

Under an Employment Practices Liability policy, you can purchase an endorsement that covers Wage and Hour defense costs. This coverage is a sublimit of usually $150k-$250k that would cover attorneys defense fees in situations like the one presented above. At the time, our client did not have this, and it ended up costing them $300k out of pocket in legal fees and settlement. It is important to note that the coverage cannot cover settlement because, if an employer is deemed guilty of not paying wages, they have broken the law. Insurance cannot cover anything that is illegal.

I hope this article was helpful and encourages you to do a review of what you have in place, as not having it could cost you hundreds of thousands of dollars.

References:

California Meal Break & Rest Break Law (2020) – Quick Calculator + Charts