Sitting at an expansive conference table in his insurance office’s meeting room, Ken Ross recalls how he had just that morning asked a client whether he wanted to buy employment practices liability insurance — the insurance that covers your business if an employee sues.

“He said, ‘no thank you’,” recalls Ross, vice president and treasurer of Clark Insurance in Portland. “He has 11 employees.”

A polite dismissal by a small business owner for a fairly obscure insurance product is not surprising. But just a couple of years ago, that conversation would never have happened.

Employment practices liability insurance has, just within the last two years, become much more common in Maine. (Another Maine insurance company offered the product a decade ago but discontinued it three years later because it didn’t sell, Ross says.) Now, however, roughly 10% of Clark’s 4,500 or so business clients own employment insurance, twice as many as a year ago. “Insurance companies are stumbling over one another to offer this product,” Ross says.

More businesses are purchasing the insurance — which covers discrimination or harassment cases, for example — as their awareness about it increases, he says. Portland insurance company MEMIC began selling an employment policy designed for Maine’s small businesses in April 2008. Since then, about 8,000 of its roughly 20,000 clients in Maine have bought the insurance, according to Michael Bourque, a MEMIC spokesman.

The interest has sprung from tough economic times, which can lead to tough legal times for businesses. Companies laying off workers can trigger discrimination suits. Bankruptcy filings rise. Firms break contracts. Employment complaints filed with the Maine Human Rights Commission have, for instance, increased in the last two years.

A Texas-based law firm, Fulbright and Jaworski L.L.P, reported in its sixth annual Litigation Trends Survey that many U.S. companies are anticipating a swell of litigation in the coming year, based on information supplied by corporate attorneys. The report claims that more than half of the surveyed attorneys predicted lawsuits would at least remain stable in the coming year while 42%, compared to 34% in 2008, are bracing for more cases.

The survey reports that the most common pending litigation types against U.S. companies have to do with labor/employment and contracts.

“Generally, litigation rises in an economic downturn as regulators tend to step up enforcement, laid-off workers head to court and companies need to file more suits in order to collect on money owed,” says Stephen Dillard, head of Fulbright’s global litigation practice, in a company release.

But people should not panic. The number of new lawsuits reported against U.S companies did not significantly increase in 2009, according to the same litigation survey. It’s possible that at the same time the recession is giving corporate counsel the jitters, it is also, ironically, engendering a lull as cash-strapped businesses and people try to avoid legal fees.

An informal look at civil litigation in Maine’s courts reveals a rising number of cases, but it is difficult to winnow out ones involving businesses. Overall, civil cases in Maine courts have jumped from 12,887 in 2005 to 20,254 in 2009. Specifically, contract cases — the most likely to involve businesses — have increased from 6,143 to 10,788 over the same period. (This category generally does not include labor contracts and is not covered by employment insurance.)

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