Not#YouToo

By Lainee Beigel | January 7, 2019

How Not to Become Part of the #MeToo Conversation, and Where to Look for Help If You Do

Not long ago, if someone asked you if you had heard about Harvey Weinstein and Kevin Spacey, you would assume they were working on a film together. Or, if you were asked your thoughts on casino mogul Steve Wynn, you would think the question was in reference to his next big project in Las Vegas.

However, in a very short period of time, Weinstein, Spacey and Wynn have become three of the bigger names mentioned as part of the #MeToo conversation sweeping the country. Employees, colleagues and even job seekers have made allegations of sexual harassment against a number of celebrities, politicians and workplace supervisors across nearly every industry. The results of these allegations (true or not) can cause significant financial and reputational damage to an individual and/or an organization. And if you think your organization is immune, it’s not.

Truth be told, what gets reported in the news is only the tip of the iceberg. That’s because sexual harassment occurs anywhere people interact. Many instances of sexual harassment in the workplace never make their way into the mainstream discourse even though they result in internal investigations, arbitrations and lawsuits.

Companies are taking a fresh look at internal processes to see where issues can be identified and how they can be prevented. Companies dealing with their own #MeToo situations often look to their insurance policies to cover potential liabilities that may arise from those situations.

It is also becoming more common for these types of claims to trigger more than one policy. This article provides an overview of some of the issues presented when investigating coverage under different policies and discusses strategies companies can employ in order to avoid triggering their insurance coverage in the first place.

CGL Coverage

Most companies carry commercial general liability (CGL) coverage, which for purposes of this article,f applies to third-party liabilities arising out of “bodily injury” and “personal and advertising injury.” Coverage generally is available for “bodily injury” only if: (1) the “bodily injury” is caused by an “occurrence” — i.e., an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and (2) the “bodily injury” takes place during the policy period.

Coverage is available for “personal advertising injury” only if it arises out of an offense — such as oral or written publication of material that either slanders or libels a person, or violates their right of privacy — that is related to the insured’s business and occurs during the policy period.

At first blush, allegations of sexual harassment could potentially trigger coverage under CGL policies. For example, bodily injury liability coverage might be available for emotional injuries claimed by employees that allegedly resulted from inappropriate interactions with co-employees facilitated by employers failing to supervise those co-employees. Emotional injuries may or may not qualify as bodily injury depending on what state the allegation occurs in.

More likely, CGL coverage for any bodily injury to an employee of the insured would be barred by the employer’s liability exclusion. This exclusion is standard in CGL forms and excludes coverage for bodily injury to an employee of the insured arising out of and in the course of employment by the insured. CGL policies are also frequently endorsed with employment-related practices exclusion endorsements that preclude coverage for bodily injury and personal and advertising injury to a person arising out of “[e]mployment-related practices, policies, acts or omissions,” such as defamation, harassment, and humiliation, among other things. The rationale for including these endorsements on CGL policies is simple: CGL insurers don’t provide coverage for risks that are within their insureds’ control.

EPLI Coverage

To address the general absence of coverage for employee injuries under CGL policies, the industry developed employment practices liability (EPLI) coverage endorsements to CGL policies, and separate EPLI policies, for damages or losses arising out of wrongful acts/wrongful employment acts against the insured’s employees and others, including applicants for employment.

Some of the main issues to focus on in EPLI coverage are as follows:

• EPLI coverage often applies on a claims-made or claims-made-and-reported basis as opposed to applying on an occurrence basis. Only a policy in effect when the claim is made — as opposed to when the actions giving rise to the claim occur — would be triggered.

• Policies providing EPLI coverage often relate later claims to earlier ones so as to ensure that only one policy is triggered.

• EPLI policies may also include a bodily injury and/or criminal conduct exclusion. Depending on the circumstances, the insured may have to look to another policy for coverage.

• The limits available under EPLI coverage may be less than the limits available under CGL coverage. Not only that, EPLI coverage limits can often be reduced by both indemnity payments and costs paid by insurers to defend their insureds.

D&O Coverage

One type of coverage that might be overlooked when it comes to alleged sexual harassment is directors and officers liability (D&O) coverage. Specifically, if a company operates through a board of directors, then: (1) allegations might be levied by the victim of the alleged harassment stating that the board failed to properly ensure company policies and practices were enforced; (2) a board member’s conduct might cause one of the corporation’s shareholders to initiate a derivative suit; (3) the company might have to indemnify a board member alleged to have done the harassing if the company’s by-laws require it; and/or (4) the company may be served with subpoenas or other requests for information as part of an investigation into the harassing board member’s conduct.

D&O policies might provide coverage for a loss that an insured becomes obligated to pay in these situations. But D&O policies may bar coverage for matters pertinent to sexual harassment allegations through exclusions applicable to claims arising out of any: (1) employment-related wrongful act and/or (2) deliberate violations of law.

Company Efforts to Prevent Harassment

It is important to understand the types of coverage outlined in this article and the ways in which policies may be triggered. Having these types of policies in place provides companies with security in the face of potentially adverse circumstances. However, like most problems, common sense measures can go a long way.

The best way to prevent claims from the outset is to implement extensive and consistent harassment training throughout all levels of an organization (including company executives, who might find this type of training unnecessary). Executives may not sign and acknowledge anti-harassment policies, allowing a plaintiff’s attorneys to argue that employees are not held to the same standards. In order to prevent such occurrences, companies might consider implementing protocols (whether internally or with a third-party vendor) that hold all employees accountable for completion of corporate training. Moreover, reporting structures should allow employees to feel comfortable reporting such incidents.

Early Renewal

Due to an uptick in claims and potential exposure, underwriters may begin requesting more detail on applications regarding procedures and protocols during the renewal process. There may also be higher levels of scrutiny involving certain venues, claims history, and resolution of outstanding claims.

Conclusion

Against the backdrop of the #MeToo movement, there are a number of strategies that companies can employ to prevent harassment in their workplaces. Education is a great starting point for companies to begin to understand their risks and implement controls. However, even the best efforts sometimes fail. In that case, there are insurance products like the ones discussed to protect companies.

About Lainee Beigel

Beigel is a juris doctorate and client executive in the Philadelphia office of RCM&D, an independent insurance advisory firm for risk management, insurance and employee benefits in Baltimore, Md.

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Insurance Journal West January 7, 2019
January 7, 2019
Insurance Journal West Magazine

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