She noted that the toughest classes to write are manufacturers and restaurants. “With manufacturers, you often have an informal atmosphere and the supervisors may lack training on employment matters. Restaurants are problems because you many times have 20-year-olds supervising teenagers.”

Panel moderator Michael Maloney, underwriting manager for Simsbury, Conn.-based Chubb Specialty Insurance, saw this year's EPLI premium increases as being caused by insurers not getting enough increases last year, especially for employers in the 1,000- to 10,000-employee range.

Although the panel noted that class actions are for the most part difficult for plaintiffs' attorneys to pursue due to obstacles in getting the class certified by a judge, Mr. Maloney sees “mass actions”–a series of individual or small group suits based on similar allegations–as a serious concern, especially for smaller employers.

“Increasing claim frequency, higher settlement costs and generally rising 'disposal costs' of claims” have been hallmarks of the EPLI line during the past 12 months, Mr. Maloney said.

Two other panelists saw mixed signals in pricing.

Gretchen Steichen, vice president of GeneralCologne Re in St. Paul, Minn., said that smaller employers are getting “nominal increases” of zero to 25 percent. For the larger employers, she said she is seeing increases “all over the board,” and the increases are focused more on individual risk characteristics than on class or location. Ms. Steichen pointed to public entities as a class having high claim frequency for EPLI.

The lone broker on the panel, Thomas Hams, a director of Chicago-based Aon Financial Services Group, said he sees the EPLI market as “flattening out,” with “increases of maybe 20 percent since April of last year.” Prices for EPLI in the stand-alone market are much higher than if the coverage is written as part of another policy (such as in a D&O or package policy). “But every risk can be placed,” Mr. Hams pointed out.

Agreeing with Ms. Steichen, Sal Pollaro, senior vice president of Zurich North America in New York, said that EPLI price increases have been “surgical,” which he explained as “more germane to account experience” than location or class. Problem classes in his view include investment banks, law firms, technology companies and retailers.

Discrimination allegations based on age and race are the most common EPLI claims for companies with over 300 employees, Mr. Pollaro said. In contrast, he said, “sexual harassment is the most common claim for companies with fewer than 300 employees,” going on to indicate that “smaller employers often do not have the required policies in place to deal with this problem.”

Ms. Galioto pointed out that under the U.S. Supreme Court's Farragher and Ellerth cases, “employers can escape liability for sexual harassment if they have reporting systems in place and employees unreasonably fail to report the harassment.”

Ms. Galioto went on to note that it has become considerably easier for employees to bring sexual harassment suits in what she calls “the country of California,” as that state has deviated from the federal standard. “A recent California case makes employers strictly liable for sexual harassment committed by supervisors, regardless of the reporting procedures in place,” she lamented.

In addition to California, she mentioned Texas as a problem EPLI state due to high awards there, while Mr. Pollaro said that New Jersey and Georgia are difficult states. Mr. Maloney highlighted Michigan and West Virginia as problems, noting that higher jury awards come out of these two states.

With the insurance company people on the panel frequently complaining about the EPLI climate in California, there was a question from the audience as to why they didn't just stop writing there.

National Union's Ms. Galioto replied that the problem in California is the small employers, not the large employers based there or with operations in the state. Also, she noted that certain regions in the state, including the San Francisco and Los Angeles areas, pose the majority of the problems.

Mr. Pollaro of Zurich added that the self-insured retentions of California employers are generally three times what is required elsewhere.

The panel seemed to agree that EPLI in California is viable, it just has to be underwritten more carefully than in other states.

In a separate session, sexual harassment became the focus of a frank discussion by employment law defense attorney Hunter Hughes of Rogers & Hardin LLP in Atlanta, Ga.

Mr. Hughes likened sexual harassers to bank robbers, noting that neither of these types of wrongdoers think they will ever get caught. “But they almost always are caught,” he added.

In one case, Mr. Hughes related how a chief executive officer was found liable for a “breach of trust” to the corporation, even though his affair with a female subordinate was consensual. “The corporation had a policy that a dating relationship between a manager and subordinate must be reported to higher management,” Mr. Hughes explained. “The CEO was actually the one who signed the policy, but he failed to follow it.”

“There will always be harassment claims because men are stupid,” said Mr. Hughes, drawing applause from many of the female attendees. “Sometimes the problem is with the woman, but in my experience it's been mostly with the man.” He noted that many claims can be traced to a consensual workplace romance that “goes bad.”

During another session, workplace issues related to Severe Acute Respiratory Syndrome were discussed. Panelist Ray Cusick, director of risk transfer for The Hartford Financial Services Group in Hartford, Conn., hammered home the pitfalls of a common employer practice requiring employees who were possibly exposed to SARS to remain home during the 10-day incubation period for the virus.

These employers are in effect saying “don't come in and infect management and co-workers, but it's okay if you stay home and infect your family,” Mr. Cusick noted. He added that a wife of one employee ordered to stay home went to a hotel for 10 days and convinced her husband's employer to pick up the tab.

In that same session, an anomaly concerning a popular loss control practice was analyzed. Jack McCalmon, president of The Agos Group, a Tulsa, Okla.-based employment practices loss control firm, found that when insurers provide telephone numbers for employers to call for advice on employment-related problems, if the advice is free then they generally have lower usage rates than insurers that charge a fee. “The difference is that the companies that charge a fee promote the service better,” he said.

Mr. McCalmon also had opinions about why insurer loss control audits provided in connection with EPLI policies were often not a great success. “The insured's finance department purchased the insurance and then informed the human resources department that their practices were about to be audited,” he said. Human resources wanted to do their own audits or have law firms that they were used to dealing with do the audits, Mr. McCalmon noted.

Reproduced from National Underwriter Edition, May 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.