The changing face of litigants

In fact, the profile of the average worker filing a complaint has been rapidly shifting. The Wall Street Journal recently reported that a growing number of sexual harassment claims have come from men since the start of the recession in the fourth quarter of 2007. This increase in male sexual harassment claims coincides with a recession that has hit men harder than women: from September 2008 to January 2010, 4.4 million men lost their jobs compared with 2.3 million women, according to the Bureau of Labor Statistics.

Historically, harassment cases were filed by women against men, but the number of cases filed by men has steadily grown since a landmark 1998 Supreme Court ruling held that same-sex harassment is a valid claim under federal anti-discrimination laws.

Recently, Congressman Eric Massa (D-NY) resigned from his position after allegations of sexual harassment of a male employee. While a formal complaint has not been filed in this case, it demonstrates an increasing awareness in the workplace of sexual harassment complaints filed by men. Antics that previously would have been called "fraternity-type horseplay" are no longer being tolerated in the workplace. The EEOC has been filing more lawsuits involving male victims, stating that it wants to send a message that such behavior is unacceptable and unlawful.

All employers are vulnerable

As a result of this climate, employers of all types and sizes are much more vulnerable to an employment practice claim than even a couple of years ago. This environment should have a direct impact on the risk management practice of every employer in the U.S.

As a result of company downsizing or business bankruptcies to meet the changing needs of the economy, many employees have been laid off or terminated.

Some recent examples of claims making their way through the court system capture the essence of the rapidly evolving nature of the exposure:

1. A 66-year old secretary with the City of North Lauderdale, Fla. was awarded $75,000 in damages by a Broward civil court jury in March 2009. Photos of the weeping grandmother--facing the prospect of being homeless and without a car--were run on television for mass consumption.

2. A complaint was filed in February 2009 with the California Department of Fair Employment and Housing on behalf of 440 employees who were laid off by Lawrence Livermore National Laboratory in May 2009. This group included scientists, engineers, financial analysts and facilities technicians. Ninety-four percent were over the age of 40.

3. A former manager at Google--now 58 years old--filed suit in 2004, claiming age discrimination. The plaintiff claimed that younger Google staffers routinely referred to him as "old man." His attorneys contend that he never received a negative performance review, and that his firing was related to the IPO that Google did in 2004. The case has been making its way through the California court system, and is now on its way to the California Supreme Court, which will soon be hearing arguments from both sides.

4. In November 2009, it was announced that more than 200 West Virginia coal miners over the age of 40 will share an $8.75 million settlement in an age discrimination lawsuit they filed 3 years before. The previous owner of the mine had gone bankrupt, and the miners all lost their jobs. They weren't picked up by the successor company, Spartan Mining Co.

It is worth noting that all of these cases began before the political actions described above, meaning that the watershed of events yet to come had not yet begun at the time they were filed. It should also be apparent that the burden on the employer population will continue to increase, as long as there are perceived economic injustices in our economy, and a government that believes itself charged with rectifying them.

Wage-and-hour lawsuits which have been measured by the number of filings and the size of settlements have surpassed employee discrimination suits, according to a new report from Advisen Ltd.

"Publicity surrounding changes made to the Federal Labor Standards Act in 2004 has been a catalyst for class action lawsuits," said John Molka III, author of the report. "Enforcement efforts by the U.S. Department of Labor have further stimulated class actions. American businesses are exposed to very large losses from these suits."

Wage-and-hour issues are not only limited to hourly employees, the Advisen report indicated. Companies employing salaried professionals also have been subject to large class action suits.

Mitigating the risk

Professional insurance agents and brokers have a clear role to play in working with their clients to identify and mitigate the exposures to loss arising out of discrimination claims.

Insurance professionals should make sure that their clients conduct an analysis of their business practices regarding employment and human resources. If best practices were put in place previously, it is important to ascertain that the employer is complying with them. Are the employment practices policies understood by all employees--no exceptions? More importantly, are they being followed--no exceptions?

If the client has little or no awareness of its exposure to employment practices claims, the insurance professional should advise them to develop a comprehensive corporate policy that covers philosophy, process and procedure. If the client has a human resources department, then it should be involved from step one. It would also be a good idea for the client's attorney to be a part of this process.

The insurance agent or broker can suggest this review at the time other insurance risks are being evaluated--during the pre-renewal discussions that take place annually with the insured.

Agents should make this discussion topic a reason for a mid-term get-together. It will demonstrate to the client that the insurance agent is on top of current events and issues that may affect the client's operations. It also shows a value-add in the relationship.

A key element in the risk management process is obtaining adequate employment practices liability coverage (EPLI). From the buyers' perspective, there is good news. In the first quarter of 2010, there is ample capacity in the market and coverage is readily available for all sizes of employers. Many insurance carriers are interested in competing for this business. There is no immediate evidence that the market will harden anytime in 2010. Even though there is general concern among carriers about the accelerated evolution of the exposure due to the socio-economic climate, none have indicated a reticence to afford EPLI coverage. The pricing and availability trend for EPLI products will remain favorable through 2010, and probably into 2011.

Entrants into the EPLI marketplace have increased. Coverage is available on an admitted basis, as well as the traditional non-admitted approach. Standard underwriters have entered the market, sometimes offering the coverage on a sub-limited basis in their general liability or package policies. Some E&S carriers have broadened their coverage offerings, which is a positive for the insurance buyer. For example, third-party coverage--for discrimination and harassment claims brought by non-employees--has become available in the last couple of years.

If nothing else, an employer should seriously consider purchasing an EPLI policy for the defense coverage. Having a policy cover the defense costs during an expensive litigation process could be the single most important reason to have the insurance.

There also is a distinct element of insurance agents' E&O exposure to be considered. The standard commercial general liability policy does not cover EPL, so if insureds are under the impression that they are covered by their conventional business insurance policies, they are in for a rude awakening if they are served with a discrimination suit.

The first recipient of their anger and distress is likely to be their insurance agent. It is therefore critical that the insurance agent/broker clearly outline the costs/benefits of purchasing this coverage, and then obtain written acknowledgement from their insured that this option was offered to them.

The professional insurance agent or broker can provide tremendous added value to his or her insureds by staying informed of the current environment, educating insureds on the risks and potential negative economic impact of doing nothing, and assisting in the implementation of a sound program of risk management which includes the purchase of a comprehensive EPLI policy.