Professional liability risks pile up during the pandemic

Professional liability risks pile up during the pandemic | Insurance Business America

Professional liability risks pile up during the pandemic

As companies return their employees to work across the US, and then have to bring them home again as reopening plans in certain states shift in the face of the coronavirus, they face a litany of professional liability challenges. Not only are leaders being tested by how effectively they follow health and safety guidance in light of the pandemic, but they also face a tough economy, which brings financial and operational risks into the fold.

“Anytime there has been an economic downturn, that’s been a very big challenge for any and all companies,” said Cary Nichols, Argo Pro SVP. “They tend to operate not as efficiently and what we’re seeing right now with COVID-19 is you have companies struggling to operate as normal, never mind adjusting people to work from home and a lot of other challenges.”

COVID-19 is a significant event that most companies didn’t consider could have such an impact. In turn, experts are predicting that there’s the potential for a lot of claims to come out of this situation, and compared to past events, like 9/11 or the Global Recession in 2008, the insurance market is not as willing to play ball with insureds.

The professional liability insurance market was already hardening in the lead-up to the coronavirus as more carriers were pulling back and prices were going up. The fact that plaintiffs’ firms have started to chase event-based class actions focusing on issues like the #MeToo movement, fires in the West Coast, and cyber breaches hasn’t helped. “Claims for securities class actions have almost doubled to about 400-450 a year,” said Nichols.

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Notably, compared to the hard market in 2001 when rates went up, but capacity could still be found, the issue now is that not only have rates risen, but there’s not a lot of capacity in the market. As a result, brokers are finding it more difficult to build insurance programs for their clients.

In the midst of the pandemic, there has also been some good news for historically marginalized individuals that nonetheless also introduces risks. In mid-June, the US Supreme Court ruled in a historic decision that the 1964 Civil Rights Act protects gay, lesbian, and transgender employees from discrimination based on sex. While celebrating this victory, company leaders also need to take note of the employment practices liability implications stemming from the ruling.

“A lot of especially middle market companies and insureds don’t have their own HR department or they don’t have the ability to necessarily put into place a program right away that incorporates what this ruling is,” said Priya Gandi, D&O attorney for QBE North America. At the same time, she continued, “You’re going to see a lot of people who felt like their voices were suppressed feeling more empowered to speak up for themselves and to speak up for those around them, so you’re going to be seeing a variety of new claims arising under employment practices liability in furtherance of this ruling.”

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These claims could focus on issues like a hostile work environment, discrimination, equal pay, and wrongful termination.

In preparation for the impacts of this ruling, companies need to be implementing programs and zero-tolerance policies for any type of discriminatory behavior against LGBTQ community members. They should also be regularly updating their training materials to focus on diversity and inclusion because “it’s through those trainings that people start to understand how important it is to keep an open mind and respect one another, and to watch out for one another,” said Gandi.

Insurance experts can help companies on this front, and as they deal with the coronavirus fallout. QBE, for instance, offers insureds access to its Business Resource Edge solution, where middle market insureds in particular can get help in implementing programs and training focused on incorporating landmark rulings into their businesses and their everyday practices.

The Argo Pro team, on the other hand, is taking advantage of its experts’ skillsets to come up with more professional liability solutions for customers during this time. A group of its most experienced members and claims experts are meeting on a weekly basis “to leverage what we’ve learned through past accounts,” said Nichols.

“A company could look like they’re struggling mightily, but [it’s another story when you] really pay attention, ask the extra questions you need to about financing or their debt, or how they’re dealing with their employees and their layoffs, or how they’re going to emerge from these stay at home orders and try to get their businesses up and running again,” he added.

In the meantime, brokers should work on showing their clients in the best way possible to underwriters. They need to roll up their sleeves and take stock of all the information, and not just public filings, that an underwriter may need, to potentially take an account that was on the borderline of being considered Tier Two or Tier Three and put it into a better class.

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“Airlines, cruise lines, automotive, energy, higher education, retail REITs, IPOs – all those industries are in that tougher tier right now, but if a broker can present them with all the information way out ahead of time, that gives the underwriters time to really try and understand it,” said Nichols. “It doesn’t mean that they’re not going to have a different experience this year versus two years ago – the market has just changed that much – but … having that extra level of information can help underwriters get to some version of ‘yes’ that they might not have if they just had the public filing.”