Sexual harassment as a workforce issue
Insureds will require several types of insurance to defend sexual harassment claims.
According to MarketStance, a research firm that tracks insurance trends, only 3% of companies with fewer than 50 employees report they carry coverage for sexual harassment.
Yet, according to a study released by specialty insurer Hiscox, more than 35% of employees in the U.S. feel they’ve experienced workplace harassment. Among women, the number rises to 41%. Of those individuals who reported the incident to management, 37% did not feel the charge of workplace harassment was handled properly. This percentage rises to 49% for women.
The fact that there is such a large gap between the percent of insureds and the percent reporting sexual harassment means those who work in the risk management and insurance industry must do a better job of educating our insureds regarding this risk.
While many workplaces are free of sexual harassment, statistics indicate the risk is prevalent and should be transferred to employment practices liability insurance (EPLI) with coverage for sexual harassment and discrimination.
Just as insureds don’t ignore risks from fire, flood, theft, personal injury, professional liability and cyber intrusion, the potential for sexual harassment charges must be mitigated and transferred to sexual harassment coverage through EPLI.
Education is vital
Proper sexual harassment risk mitigation efforts begin with education and training. Insureds must train employees to understand and prevent sexual harassment activity before personal harm and disruption occur in the workplace. Training should be conducted by experienced human resources professionals. In California, the law requires two hours of sexual harassment training every two years for companies with 50 or more employees. This can serve as a good rule of thumb for companies operating in all states. A Delaware law went into effect on January 1, 2019, requiring specific training on sexual harassment for all employers with 50 or more employees. More states are expected to follow Delaware’s lead in the near future.
Education efforts should outline the nature of sexual harassment. Role-playing can be a useful education tool. When does a supportive hug become harassment? Is it acceptable to place your hand on a colleague’s shoulder? What about a colleague’s back? Is it harassment to invite a colleague to the hotel bar for a drink during a business trip? What if the colleague is a subordinate? Does it become acceptable if you include a third party? Should you meet a colleague outside his or her room, or in the lobby?
The fact is innocent actions can sometimes appear otherwise to the person on the receiving end. This can be particularly true across generations and cultures. Education can help to save the actor from embarrassment, the recipient from feelings of discomfort and your insured from a lawsuit.
Education should be joined by explicit documentation outlining the insured’s code of conduct. While each employee must be told what is not permissible when on the job, this information must also be documented in writing. Should a manager or employee engage in actions contrary to the code of conduct, documentation will help to mitigate risk to the insured.
Documentation should also clearly set out proper channels of communication should an incident occur. In the study released by Hiscox, 40% of individuals experiencing harassment did not report it to management or law enforcement. Individuals reporting an incident should feel safe in doing so. The door to human resources or management should be open to an individual wishing to report sexual harassment and closed when the complaint is being lodged.
Employees must feel certain their standing in the company, now and in the future, will not be compromised after reporting an instance of harassment. This message must be clearly communicated in word, on paper and in practice.
Charges of sexual harassment have become a third rail for companies across America. The reputations of large, well-capitalized firms have been damaged and even shredded. The list includes Bank of America, Ford Motor Company, The Weinstein Company, Uber, Fox News, CBS and NBC.
While reputation management insurance isn’t as common as such long-familiar coverages as auto, liability and workers’ compensation, it can be an effective way of transferring a company’s risk of reputation loss. Reputation management insurance will help pay for communication efforts to win back your insured’s good reputation.
There is nothing new about sexual harassment. What is new is the amount of news coverage, societal attitudes and the proliferation of reporting vehicles. There is also zero tolerance for sexual harassment; no margin for error even if the “perpetrator” had been unwitting.
As professional claims advocates, we can help make sure our insureds have the proper coverages in place when a sexual harassment charge occurs.
Gerry Sorge (gsorge@kmrdpartners.com ) is a claims advocate at KMRD Partners, Inc., a risk and human capital management consulting and insurance brokerage firm.
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