ISO Products Perspective
John Giordano, CPCU, AIS, AU, And Doug Kahn, CPCU, AMIM, AIM, AIS, AINS
COVERAGE FOR EPLI EXPOSURES
Looking at the impact of wage and hour, retaliation, and social media claims
In October 1991, the country was both _1_ -L Amesmerized and polarized by allegations leveled against a Supreme Court nominee by a former employee while the nominee was the employee´s supervisor at the Department of Education and the Equal Employment Opportunity Commission (EEOC). In November of the same year, President George H. W. Bush signed into law the Civil Rights Act of 1991. The act authorized access to jury trials with respect to discrimination claims, introduced the possibility of punitive damages, and also imposed a cap on the dollar amount a jury could award for both punitive damages and pain and suffering. Those two events in 1991 were instrumental in making employment practices liability both part of the cultural landscape and an emerging line of insurance coverage.
Along with a heightened awareness of workplace discrimination came the inevitable claims of discrimination. According to the EEOC, approximately 72,000 charges of discrimination were filed with the commission in 1992. Twenty years later, in 2012, the latest year for which EEOC statistics are available, nearly 100,000 charges of discrimination were filed.
Before 1991, employment practices liability (EPL) coverage was hardly a blip on the radar screen. In 1991 just a handful of insurers were offering some sort of EPL coverage. Today recent reports indicate that about 50 carriers are active in the EPL market. Initially coverage features varied widely as insurers sought to provide solutions for employers facing claims of discrimination. In 1998 ISO introduced its first standardized employment practices liability policy.
From the start, the primary focus of EPL coverage has been on protecting employers against claims of discrimination. Over the last 20 years, the definition of what constitutes discrimination has evolved both legislatively and in society. In general, Title VI of the Civil Rights Act of 1964 prohibited discrimination on the basis of race, color, and national origin by government agencies receiving federal funds. Title VII of the act expanded the prohibition to employers of 15 or more people with respect to discrimination on the basis of race, gender, color, religion, and national origin. Other significant laws that can affect EPL exposures are the Equal Pay Act of 1963, the Age Discrimination In Employment Act of 1967, the Pregnancy Discrimination Act of 1978, the Immigration Reform And Control Act of 1986, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, and more recently the Genetic Information Nondiscrimination Act of 2008.
Over the last few years, several emerging issues have created challenges for EPL insurers as they confront claims for alleged wage and hour violations, retaliation, and the use of social media.
Wage and hour-related claims have been in the media spotlight in recent years, in part because of the potential for class action suits and the opportunity for sizable jury awards. Several high-profile employers have faced wage and hour suits. According to USCourts.gov, the number of Fair Labor Standards Act lawsuits filed in federal courts has increased from about 1,900 cases per year in 2000 to more than 8,000 cases in 2012. Some policies now contain an endorsement expressly addressing wage and hour exposures and typically providing defense-only coverage subject to a sublimit. Insurers apparently are reluctant to provide indemnity coverage with regard to settlement of such claims.
Although coverage for retaliatory actions was often excluded from EPL policies in their early iterations, coverage for such actions has since become commonplace. Retaliation, one of the most common charges brought to the EEOC, has topped the list of EEOC charge statistics since 2010. The EEOC Web site breaks down retaliation into three main categories:
Adverse actionan attempt to prevent a person from opposing a discriminatory practice or participating in an employment discrimination hearing
Covered individuals those who have opposed an unlawful practice, been part of a proceeding, or requested an accommodation based upon the law
Protected activitysuch as opposing a practice perceived as unlawful discrimination or participating in an employment discrimination hearing
Retaliation claims filed with the EEOC in 2012 totaled nearly 38,000, or about 38% of all claims received.
The exponential growth of social media over recent years has created a new set of issues that can affect EPL exposures. Social media platforms such as Facebook and LinkedIn are reportedly being used by some corporate recruiters as background research tools, exposing those employers to possible allegations of discrimination. Some employers reportedly have required prospective and current employees to provide their passwords and other social network information.
To address these and related concerns, the federal Social Networking Online Protection Act was introduced in Congress in 2012 (HR 5050) and again in 2013 (HR 537). Although its chances of becoming law appear slight, about two-thirds of the state legislatures have introduced or enacted similar legislation. Such legislation prohibits employers from requiring or requesting user names, passwords, or other information that provides access to personal accounts on a social media Web site.
In response, some insurers have begun to address the need for coverage for liability arising from social media, often by optional endorsement. It is often recommended as a best practice that employers have a social media policy pertaining to the organization and its employees.
Many technological, social, and legal trends are giving rise to new EPL exposures:
Employers´ efforts to leverage new technologies
Issues related to online workplace bullying
Multiple lawsuits brought against a single employer at one time
The proposed Immigration Reform And Control Act
The growing number of states that are legalizing medical marijuana
Employers and insurers alike will continue to face new and unanticipated exposures in the continually evolving business environment both domestically and internationally. The challenge is to monitor emerging trends and identify those that are most likely to create new exposures so that appropriate coverage and risk management responses can be developed.
John Giordano is assistant manager and Doug Kahn is manager, both with Specialty Commercial Lines at ISO, a member of Verisk Insurance Solutions Group at Verisk Analytics (Nasdaq:VRSK).