Managing domestic risk
Chubb helps affluent policyholders deal with the risks of employing domestic help
By Phil Zinkewicz
In the late 1930s and early 1940s, playwright Philip Barry often brightened up Broadway’s already brilliant lights a bit further with his lighthearted and sophisticated comedies about the rich and mighty and their foolish foibles. Two notable examples are “Holiday” and “The Philadelphia Story.”
In “Holiday,” a young and talented stockbroker shocks his ultraconservative future in-laws when he tells them that after he makes his first million, he plans to retire at a young age so that he and his soon-to-be wife can enjoy life. He can always go back to work later when and if the money runs out, he tells them. The play centers on how his prospective in-laws, using their own daughter as blackmail, work diligently to dispose him of such irresponsible notions.
In “The Philadelphia Story,” a snooty society woman gets her comeuppance when she decides to marry a supposedly down-to-earth mine owner who has moved into the realm of the nouveau riche, only to discover that he is even snootier than she is.
In Barry’s plays, the background is usually elegant, the costumes gossamer and the banter artfully tinged with wit. Ever present in these comedies are the servants, although the principal dramatis personae hardly ever mention their existence except to say occasionally, “Hilda, please take so and so’s hat,” or “Hilda, is lunch ready?” Servants were there to perform a function and no more, like an electrician changing a light bulb. The only problem that might arise with the servants was when one of them had “been at the sherry again.”
In real life, however, domestic workers can create more problems than just a bit of tippling. Especially in these litigious times, employing domestic help—whether it be a full complement of maids, butlers, chauffeurs and cooks, or just a nanny to watch a preschooler in a two-earner household—requires both care and caution.
The Chubb Group has long been known in the industry for providing sophisticated insurance products that are designed to satisfy the needs of an upscale insurance market. Chubb addressed the issues that pertain to employing domestic help a few years ago when it introduced its Masterpiece Employment Practices Liability Coverage as an add-on to an insured’s homeowners policy.
The Masterpiece product provides policyholders who employ five or fewer residential staff members with insurance for claims alleging wrongful termination, sexual harassment and employment discrimination, among other things. The policy also includes coverage for reputational injury, which addresses the costs of hiring a public relations firm to help control reputation-related damage after (and in some cases, before) a covered incident occurs.
Today the Masterpiece EPL is available in 45 states plus the District of Columbia, according to Peter D. Spicer, vice president and new product manager, Chubb Personal Insurance.
“What has been viewed as an increasingly costly and embarrassing corporate human resource issue over the years has spilled into the households of affluent America,” says Spicer. “The unprecedented economic growth during the 1990s through early 2007 resulted in more families hiring domestic help. However, with the slowdown in the economy and the tightening job market, there are greater exposures to litigation when domestics and other employees are dismissed and believe they have been treated unfairly.”
Spicer explains that the Masterpiece EPL is available only as an add-on to a Masterpiece personal or excess liability policy with a limit of at least $5 million. The coverage applies to residential staff including butlers, chauffeurs, cooks, gardeners, housekeepers, nannies, personal assistants and security personnel whom the policyholder employs regularly to work 15 or more hours a week.
Two options are available. The first option provides $250,000 in coverage per occurrence ($500,000 aggregate) for damages, after a $10,000 deductible, and $25,000 in coverage for reputational injury. The premium is $650 per year. The second option provides $500,000 in coverage per occurrence ($500,000 aggregate) and $50,000 for reputational injury for $975.
Spicer offers some examples of the kinds of exposures that would fall under Masterpiece EPL. Let’s say that the patriarch of the family makes sexual advances toward the maid and she spurns those advances. The patriarch then makes unreasonable work demands on the maid and she quits. Even though she quit, this is called “constructive termination,” according to Spicer; and if the maid decided to sue, the policy would respond with defense and damage costs.
In another hypothetical situation, the matriarch of a family makes some offhand disparaging remarks about an ethnic group. The maid, who is a member of that ethnic group, accidentally overhears those remarks. Even though that maid personally has been treated well by the family and has received raises and bonuses, she can sue.
Risk management services
As noted earlier, Masterpiece EPL is an add-on coverage that is purchased by the insured. Recently, however, Chubb has taken the domestic employment situation to another level under its Signature Suite group of complementary risk management services.
Christie Alderman, assistant vice president, Chubb & Son, sets the stage for this new approach. “Imagine starting a new job. Your employer tells you your hours, but not much more. There is no human resources manual or dress code. The people around you are constantly screaming at each other and at you. You do not receive any feedback on your performance or an annual review. Welcome to the workplace for many domestic employees—and a potential source of liability for many household employers who are unaware of the risks they face.”
Those risks can be significant, Alderman says. “Housekeepers can get hurt on the job. They can be placed in compromising positions. And they often can gain access to valuables and personal information, leaving a family vulnerable to asset and identity theft. Yet, according to a Chubb-sponsored survey of 600 people, more than 50% do not conduct background checks before hiring their domestic help and more than 40% trust their workers with keys to their homes.”
To help its high net worth and family office customers manage these risks, Chubb has added household staff management services to its list of complementary Signature Suite personal risk management services. “Chubb has retained Teresa Leigh, a leading household and property management specialist, to help customers assess their household staffing needs and develop job descriptions, employee protocols and manuals,” says Alderman.
“Teresa can also provide advice on interviewing potential employees, conducting background checks and evaluating and retaining staff. Quite simply, unhappy household employees are more likely to damage items, be involved in theft and file lawsuits,” Alderman continues. “That is why we are providing our high net worth and family office customers with resources to both help them nurture positive relationships with their staff and reduce their risk.”
Many homeowners, Alderman comments, think of their “help” as part of the family, but they’re not. “State and federal employment laws apply to the relationships between these household employees and their employers. Homeowners place themselves at high risk if they do not manage their staff by communicating clear expectations. They also need a well-organized and documented human resources file on every employee.”
Alderman says that Signature Suite also includes background checks and online access to information on personal employment topics.
Mark Schussel, a public relations officer for Chubb, says that the Signature Suite will continually evolve to address the complex risk management problems of high net worth individuals. In addition to personal employee management, Signature Suite also offers travel security services, which address issues that may arise during vacations and visits to exotic places; personal security, which guards family assets and valuables; and collections management, which manages collectibles.
For more information:
Chubb Group
Web site: www.chubb.com