April 04 -- Expect a tidal wave of sex harassment cases to be filed this year as people emboldened by the #metoo movement, break their silence about sexual misconduct in the workplace.
Insurance industry experts — lawyers, brokers, and consultants — are warning businesses of all sizes to review their insurance policies, bolster coverage, if necessary, and limit risk. They are also advising companies to take a long, careful look at their corporate culture to address potential problems before they erupt into a courtroom or an expensive settlement.
"What we've seen is the tip of the iceberg," said Jared Zola, a partner at Blank Rome's insurance recovery group. "People who were reluctant [to file a complaint] now feel like they have a voice to be heard. They are coming out of the shadows. That's why we'll see more."
The number of high-profile sexual harassment cases exploded last year, with allegations of impropriety derailing the careers of scores of powerful men, including Hollywood mogul Harvey Weinstein, TV hosts Matt Lauer and Charlie Rose, CEO Travis Kalanick of Uber, actors Louis C.K. and Kevin Spacey, celebrity chef Mario Batali, and former U.S. Sen. Al Franken (D., Minn.).
The charges against entertainment figures and politicians have garnered the splashiest headlines, but "every company is susceptible," said Scott Hartzell, CEO of Hartzell Insurance Associates, a brokerage based in Montgomery County.
"The world has changed," Hartzell said. "I could tell you stories that would make you shudder."
Harzell insures thousands of clients across the country, mostly small businesses ranging from restaurants to trash haulers to law firms.
Employment Practice Liability Insurance (EPLI), which covers sexual harassment and racial discrimination (along with wrongful termination and retaliation) has soared in popularity in the wake of the news stories, Hartzell said.
Fortune 500 companies have long carried it. But the majority of small businesses don't have EPLI coverage, Hartzell said, or don't have enough of it.
"People don't want to pay for it," Hartzell said. "Some people don't think they have a problem."
An EPLI policy for a business of 15 employees runs about $1,500 a year and will pay out $1 million for any one claim, he said. Defending a spurious sex harassment claim could run $100,000.
"I've had it myself for many years," Hartzell said. "I've never had a claim, but I still have the coverage. It's money well-spent. I want to be able to sleep at night."
Gauging the size of the EPLI market is difficult because most insurance companies bundle it with other policies and don't break it out on their reports. ISO MarketStance, a research firm that tracks insurance trends, estimated that U.S. companies spent an estimated $2.1 billion for stand-alone employment policies in 2016, up from $1.5 billion in 2012. The market could grow to $3.1 billion by 2025, said Fritz Yohn, managing director of MarketStance.
Only 11 percent of business with 20 to 50 employees are covered, Yohn said. "Those are companies whose financial resources are less protected," Yohn said. "That's where we think the growth is going to occur."
The price of EPLI for America's largest companies has increased 30 percent since 2011, according to Advisen Ltd., which tracks insurance industry trends. "That may indicate that more companies are reporting losses," said spokesman Ray Kagan. Premiums for small and mid-sized companies have not risen substantially despite the increased number of claims making the news, according to a report issued by the Council on Insurance Brokers and Agents.
Heather Steinmiller, is managing director and general counsel at Conner Strong & Buckelew in Marlton, one of the largest regional brokers in the nation.
Premiums rise only when the policy pays out, Steinmiller said. So smart companies are getting more proactive managing the risk.
"They're reevaluating their employee handbooks, reviewing how they handle complaints and offering training to their workers," Steinmiller said.
Steinmiller said staff should be encouraged to report harassment, but it also needs to be clear who will be taking those confidential complaints. That's usually someone in human resources or an ombudsperson.
"If you don't tell them who to report it to, it's pretty meaningless," Steinmiller said. "It's not effective."
Those reports should also be relayed to the insurance carrier, she said. If a company continues to employ a known serial harasser, the carrier can exclude that person from the policy — opening the company to greater liability. If the offender is a top salesperson or a top billing lawyer, that can create massive turmoil within a company.
Training can prevent harassment before it occurs, said Arthur Flitner, senior director of knowledge resources at the Institutes in Malvern, a provider of insurance and risk management education.
"Risk control is an important part of the equation, it's not just buying insurance," Flitner said. "A proactive approach to preventing sexual harassment is the best way to manage sexual harassment risk."
Make sure your business is protected against liability. Contact Dean, Heckle & Hill for more information on business insurance coverage today!
(Article Courtesy: Philadelphia Inquirer)