EPLI in the #MeToo era

Although employee claims of discrimination, harassment and retaliation are nothing new in the workplace, they are being addressed more openly than ever before. From Andy Rubin’s exit from Google, to sexual harassment charges levied against Harvey Weinstein to a gender discrimination suit against Riot Games, more and more people are sharing their stories — and making insurance claims — against employers who may or may not have victimized these workers.

The 2018 Hiscox Workplace Harassment Study™ found that harassment happens at companies of every size and is perpetrated by employees at every level, as well as non-employees like vendors and customers. In fact, the percentage of respondents who indicated they had been harassed at large companies (those with more than 1,000 employees) and those at smaller companies (fewer than 200 employees) was the same (32%).

The financial cost to employers when their employees are harassed is only one part of the equation, but it’s a big one. From 2010 to 2017, employers have paid out nearly $1 billion to settle harassment charges that have been filed with the Equal Employment Opportunity Commission (EEOC), the study reports. These totals represent the amount that was paid out on charges that were concluded by the EEOC and don’t include any monetary payments received by plaintiffs as a result of litigation.

Sexual harassment charges on the rise

Not only is sexual harassment the most prevalent form of harassment, but preliminary data released by the EEOC notes these charges are on the rise in 2018 for the first time in eight years.

“The increased media attention with #TimesUp and #MeToo has given people a voice; they feel more emboldened,” said Ryan Collier, president of Executive Lines for Risk Placement Services Inc. (RPS). “It’s really taking off, especially in the last six months.”

Retaliation remains the biggest source of claims, according to Chris Williams, second vice president, Employment Practices Liability product manager, The Travelers Companies, Inc. “It was alleged in almost 49% of the charges filed with the EEOC in 2017,” he said, adding, “the percentage of charges alleging retaliation has increased every year for the past 20 years, with one exception in 2002.”

David Lewison is national practice leader, Professional Lines, with AmWINS Group, Inc. “It’s never the first allegation,” Lewison said. “It’s thrown in after, such as with a disability or sexual harassment claim.”

Lewison noted that retaliation is the “whipped cream on the cake,” and that it’s brought in to drive up the value of the settlement. “More drama means more money,” he said, adding that the hard part is the documentation. “If you don’t have documentation, it can get tossed out pretty quickly.”

Carrie Kurzon is national EPL practice leader with The Hartford. “There’s always a timing issue between the time of an employee’s complaint and when the employer allegedly retaliated,” Kurzon said. “The shorter the time in between, the stronger the claim. Those are hard to resolve, incurring more defense fees,” she said, adding, “retaliation is often the stronger claim as compared to the underlying claim the employee was initially complaining about.”

According to the Women in the Workplace survey from LeanIn.Org and McKinsey & Company, women are more likely to face everyday discrimination or micro-aggressions than men — being subjected to demeaning comments, having to provide more evidence of their competence, or being mistaken for someone much more junior, for instance.

The impact of the #MeToo movement

Last year, the EEOC received 20,857 charges of age discrimination. Insurance experts say that age discrimination claims with the EEOC have been at a steady 22% increase over the last decade, but there could be increases over the next five to seven years with the graying of the baby boomer generation. “You may see more charges because older workers make up more of the population than in the past,” said Patrick Mitchell, Management Liability product head at Hiscox USA.

“Perceptions that the growing population of older employees is not dynamic, energetic, adaptable, tech savvy, or innovative can yield negative outcomes when acted upon by employers,” said Jennifer Gentry, product manager, Employment Liability with Chubb. “As a result, these types of employment claims may rise in the next several years.”

Insurance industry experts note that disability discrimination as well as transgender allegations have been on the rise over the last five years. Religious discrimination, which was almost nonexistent five years ago, now constitutes 6% of discrimination allegations.

“We see a large number of EPL claims filed annually,” said Marie-France Gelot, senior vice president, insurance claims counsel, Lockton Northeast Advisory Group, the Lockton Companies. “What we see more rarely are EPL claims that go before a jury, because companies often decide to settle early, even before litigation is filed, in order to avoid potential negative publicity. “

Gelot noted that there is a lack of standardized forms in the EPLI space. “Markets have broadened the coverages with very detailed endorsements,” she said. “Brokers must understand what’s out there, especially specific enhancements for clients that address their unique exposures or distinct operations such as staffing agencies or restaurants or businesses that operate franchises. There are exposures like joint employer liability they need to be aware of.”

Timing is everything when it comes to EPL claims, too. Late reporting of claims alleging discrimination, or an adverse action could jeopardize, or even invalidate coverage under the policy. “Almost all EPL are claims-made or claims-made and reported,” said Collier. “The insurance client and broker have a certain amount of time to turn it in. As an industry, we need to do a better job of knowing what the policy parameters are.”

It’s not just an Employment Practices Liability matter, but also a Directors and Officers concern, insurance companies say. “If a board knows there has been a complaint and swept it under the rug, there could be a problem,” said Craig Grant, D&O and Management Liability Product Manager, QBE North America. “If that bad news comes to light, it may have an impact on the organization’s shares and the value of future earnings for shareholders.”

The cost of employee lawsuits

Mitchell noted that a case of harassment at a company can have far-reaching implications, including potential financial ramifications stemming from claims or lawsuits. “Business owners, executives and managers need to understand how harassment can impact their company’s reputation and what they can do to prevent it from happening,” he said.

“Eighty percent of companies that should have EPLI have not yet bought it. The ones that have EPLI have a professional, knowledgeable defense,” said Glenn W. Clark, chief executive officer and president of Rockwood Programs. “They still have to defend those allegations, even if they aren’t true,” he explained.

Some insurers said they had seen a significant uptick in first-time buyers, primarily smaller businesses as larger companies — technology companies in particular — often self-insure. There has been a noticeable spike in coverage buying, as well as increased limits at renewal time, no doubt as a direct result of the #MeToo movement.

Other carriers said that despite the media attention, companies still weren’t buying the coverage or enough of it. Many carriers noted that EPL premiums and deductibles aren’t increasing across the board because they haven’t seen an increase in harassment claims filings — at least not yet.

However, insurers have raised rates for some industries that are notorious for harassment including technology, entertainment and law.

There’s a lot of competition in the Professional Liability/EPLI market and brokers and carriers strive to differentiate their products and services. “We bring together the intangible elements our customers are looking for in a carrier: financial stability, superior customer service, state-of-the-art loss prevention services, and renowned claims professionals,” said Gentry. “We provide tailored insurance solutions to meet the varied needs of EPL customers ranging from small nonprofits with a few employees to global companies with hundreds of thousands of employees, crossing a dramatically differing set of industries.”

Although the cost of employment practices liability insurance depends on several factors including size and type of business, claims history and turnover ratio, premiums range from $750 to $4,000 annually. At the other end of the spectrum, large multi-national companies can pay significantly more. Deductibles can be as high as $25,000 to $50,000 for a small business and higher still for large companies.

“Complying with all federal, state, and local employment laws is a challenge, especially for employers with operations in multiple locations because they are potentially subject to a variety of rules and  regulations,” said  Williams.  “Even the most well-intentioned employer can be subject to employment practices liability charges and lawsuits.”

Loretta L. Worters (lorettaworters2932@gmail.com) has nearly 30 years’ experience helping insurers achieve their communications goals.

See also: States where employee lawsuits are most likely to happen