Insuring for sexual harassment? The buck doesn’t stop there

Insuring for sexual harassment? The buck doesn’t stop there | Insurance Business

Insuring for sexual harassment? The buck doesn’t stop there
Harvey Weinstein, Kevin Spacey, Matt Lauer. One loose canon can spell disaster for the companies that employ them. Even with appropriate programmes in place, can you be certain that your company is safe? If the recent slew of front-page scandals is any indicator, the answer is no.

That reality has led to a proliferation of interest in employment practice liability insurance (EPLI). The policies are offered by over 70 insurers and cover all kinds of workplace-related claims ranging from discrimination and wrongful termination to harassment. Last year, EPLI coverage accounted for US$2.2bn in insurance spending in the US alone.

Risk managers are increasingly keen to take up insurers’ offers for some semblance of peace of mind on the matter – and who can blame them? “All it takes to trigger litigation is one employee who does or says the wrong thing,” says Rhonda Prussack, head of fiduciary and employment practices liability at Berkshire Hathaway Specialty Insurance. “Companies can have the very best practices, but it’s really impossible to say with 100% certainty that every employee and every supervisor is following the rules to the letter of the law.”

Sexual harassment in the workplace was first brought into the cultural lexicon in 1991 when US Supreme Court Justice Clarence Thomas was accused of sexual misconduct by his former subordinate. At the time, only five companies offered this kind of liability insurance, says the annual Betterley Report. Since then, EPLI has ballooned into a multi-billion-dollar global industry, predicted by MarketStance to reach up to US$2.7bn by 2019. Of companies with more than 1,000 employees, 41% now have plans to address damages from discrimination and harassment.

As more high-profile cases are reported, the provision of EPLI insurance climbs in response. Nationwide reported a 15% uptick in sales in the past year – a time during which sexual misconduct scandals consistently made front-page news. “We’re absolutely seeing more interest in the coverage,” says Prussack. “Any time you have headline news in a matter that may be insurable, it triggers a greater interest. Companies that hadn’t purchased before and didn’t think they needed the coverage are now reconsidering, and companies who have lower levels of coverage are now seeking higher limits, too.”

But while EPLI can help protect your bottom line, avoiding or mitigating damages from sexual harassment in the workplace should first and foremost be addressed holistically and at its root. Risk managers can and should work cross-departmentally with HR and other functions to implement appropriate policies, training, and procedures.

Many EPLI insurers themselves are keen to show that they’re offering a wider range of value-added services in addition to providing the actual risk-transfer solutions. The Betterley Report finds that increased competition has led vendors to offer more products like employee handbook templates, training materials, whistleblowing services, and self-auditing assistance for risk management. An example comes in the form of Berkshire Hathaway Speciality Insurance’s partnership with Littler Mendelson, an employment and labour specialist law firm through whom it offers policyholders access to a service that provides training and compliance resources and even an attorney-client-privileged “help line” for legal advice.

According to some, however, having EPLI coverage in place can itself create risk. The potential for reputational damage is of course paramount to managing the risks around sexual harassment, and coping with claims using insurance could be perceived negatively – akin to offering ‘hush money’ in lieu of providing accountability. Does EPLI divert attention from what’s truly important – the creation of work environments that are free from harassment?