There are certain events in history that have lasting effects on individuals, companies, and even nations. When thinking of events that changed insurance forever, one particular United States Senate hearing stands out. This was the case of Clarence Thomas's Supreme Court confirmation process where Anita Hill accused him of sexual harassment.
This case was a huge turning point for harassment in the workplace and women running for office, but for the purposes of this article, we are focusing on how it affected the perception of and need for employment practices liability (EPL) insurance. You can read about the benefits of EPL insurance here. At the time of the hearings, only five insurance companies offered EPL insurance policies covering sexual harassment and discrimination in the workplace1. The sale of EPL insurance rose immediately following the case as companies realized the need for this type of protection as harassment claims come with hefty defense and damages costs.
Current EPL Insurance Trends
We understand the impact and significance of each following trend, but again will be focusing on how they relate to the insurance industry for the purpose of this article.
COVID-19
This pandemic has led to a record number of layoffs and furloughs, thus the highest unemployment rate the U.S. has seen since the Great Depression. For those that have remained employed, many have been moved into their home offices in order to maintain their health and the safety of others. Between all the layoffs, furloughs, and those newly working-from-home, there are common concerns that could have a profound effect on the EPL insurance market.
○ Discrimination/harassment claims resulting from furloughs/layoffs
○ Privacy issues from being questioned about travels, family health history, and even exposure to the virus
○ Disability discrimination (ADA) claims from employers not providing needed accommodations for employees to properly work from home
○ Negligent evaluation claims resulting from management asking employees to return to the office too soon.
Black Lives Matter Movement
Race and discrimination have been a driving factor of EPL loss trends since the 1994 civil rights case where thousands of Black customers accused the national restaurant chain, Denny's, of racial discrimination. Since then, there have been numerous injustices and subsequent protests, outrage, and unrest. With racial injustice being at the forefront of our society, employment relations, market development, and underwriting responses will be greatly affected. We are still waiting to see how exactly claims and impacts will manifest.
#MeToo Movement
This movement was originally founded in 2006 to help give survivors of sexual assault and harassment a voice but really gained momentum in 2017 when high-profile actresses spoke out on their experiences. Sexual harassment prevention training is offered on a wide scale, and in some cases, made mandatory, and yet harassment claims are still one of the most common issues for employers.
The #MeToo movement has shown that companies must be ready to quickly address sexual harassment, assault, and discrimination in the workplace. However, on the flip side, how a company reacts to sexual harassment claims may give rise to EPL counterclaims made by the accused.2
Age Discrimination
The Age Discrimination in Employment Act prohibits age discrimination against employees and applicants age 40 or over, yet 44% of employees report that they or someone they know has suffered from age discrimination in the workplace. The Hiscox study also revealed that the number of age-related discrimination charges filed with employers and the EEOC by workers aged 65-plus doubled from 1990 to 2017.
Wage and Hour
In these types of claims, an employee alleges that their employer failed to pay proper overtime wages. Within the past several years, a number of high-profile, high-dollar wage and hour claims have been filed on a class action basis, a fact that has vastly increased the dollar amount payable under such lawsuits. Given the magnitude of this exposure, most EPL policies specifically exclude coverage for wage and hour claims3.
Both state and local governments are enacting legislation regarding minimum wage, the definition of hourly versus salaried employees, and the classification of contractors as employees. Understanding legislation pertaining to where you work is important and why you should consult your agent.
Marijuana
The cannabis industry has grown exponentially over the past few years as medical and even recreational use has become legal in some states. Beyond the fact that a growing industry with more hourly workers increases the chances of claims, there is also an issue with drug testing employees.
In recent court cases, a New Jersey appellate court held that a disabled employee may sue his former employer under the New Jersey Law Against Discrimination (NJLAD) for alleged discrimination based on the employee's use of medical marijuana, and a Delaware state court held that a medical marijuana user may proceed with a lawsuit against his former employer after his employment was terminated because of a positive post-accident drug test result for marijuana4.
Conclusion
EPL insurance is available as either a stand-alone policy or endorsement. It provides protection against many kinds of employment-related claims. The "big three" employment-related claims that EPL insurance protects against is sexual harassment, discrimination, and wrongful termination. To learn more about EPL and what is covered, go check out this blog.
There are a few other laws that have affected businesses, the way they look at insurance, and the underwriting process over the years, so we suggest talking to your insurance agent to make sure you have all your bases covered.
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Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has a different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
Sources:
1 Richard S. Betterley, The Betterley Report: "Employment Practices Liability Insurance Market Survey 2015: Joint Employer Exposures Concern Insurers, December 2015.
2 Emily Haigh and David Wirtz, "Has #MeToo Created a New Claim of Male-Bias Discrimination?," Littler, October 21, 2019.
3 https://www.irmi.com/term/insurance-definitions/wage-and-hour-claims
4 9 AmTrust Financial, "Employment Practices Liability (EPLI) Claims Trends, Stats & Examples."