Managing Sexual Harassment Risk in the #MeToo Era

Since October 2017 when the #MeToo era began and sexual harassment claims against Hollywood mogul Harvey Weinstein were revealed, insurers have seen an uptick in not only the number but also the size of sexual harassment claims.

“[W]e’re going into mediations and settlement opportunities where every case is a Weinstein case; every case is big, every case is multimillion dollar demands, making it very difficult to resolve the claim,” said Dean Constantine, senior vice president, Employment Practices claims, AIG Property Casualty.

In a talk at the Risk and Insurance Management Society (RIMS) conference in Boston recently, Constantine stressed that “people who are sexually harassed should get what they’re entitled to” while also noting that large settlements can influence “the expectations of the plaintiff’s bar.”

He also said that the #MeToo movement has affected more than claims. It has also affected the way that people “deal with each other” and “do business.” He cited universities facing sexual harassment of female students by other students or by administrators and some companies’ senior managers trying to avoid working with women in order to avoid the sexual harassment risk.

This latter reaction raises concerns. “You’re losing mentor opportunities, and in fact that’s discrimination in itself based on gender. If you substitute woman for race, nationality, it’s obviously a bad situation,” he said.

“It’s a culture of fear,” is how Constantine described the workplace for those who are being sexually harassed. He warned of the exposures and costs associated with such a work environment, including harm to medical and emotional well-being as well as to productivity. A culture of fear can make it difficult to retain or bring in new employees, damage the brand and erode market share, he added. Also, in today’s world of social media, there is little time to react if an allegation goes viral.

This type of environment raises the costs to defend and settle claims. “They’re all going up,” he said.

Harassment Prevention

Constantine told risk managers said that the exposures associated with a culture of harassment are serious and require employers to take serious risk management steps to prevent and mitigate harassment and claims.

“The core characteristics of leadership, accountability, policy, procedure, and training, together with a good program of insurance, can minimize or eliminate that risk,” he said.

Borrowing from an Equal Employment Opportunity Commission task force that identified best practices, Constantine cited five areas that may help prevent sexual harassment: a committed and engaged leadership, consistent and demonstrated accountability, strong and comprehensive harassment policies, trusted and acceptable complaint procedures, and regular and interactive training tailored to the audience and the organization.

“It has to come from the top,” he said referring to leadership and accountability. There has to be more than a statement that the culture of the company is not going to tolerate sexual harassment; the company has to incorporate the harassment policies and procedures into its business process.

“It’s not something to be pulled off the desk and just click the box and we got it done. It takes repetition, and you have to have staffing and funding to do it in order to do it properly,” Constantine stressed.

The policies have to be easy to understand and there must be multiple ways to report sexual harassment. “You can’t have someone going up to and just reporting directly to their direct report, or to their supervisor who is harassing them,” he said, adding, “Obviously, there’s got to be an end around process for it.”

That includes situations where an executive may be involved. “There’s got to be a way that the claimant can get the word out that they need some help,” he said, suggesting a process for contacting the board or having a designated outside counsel available to investigate.

The policy has to be comprehensive and apply to all employees throughout the organization.

The policy has to describe the complaint process, which has to be easy to understand and should assure people that any investigation is going to be prompt and fair. “If someone is complaining and there’s inactivity, you’re picking up exposure and the person is suffering,” he noted.

In addition, the program should be confidential. People should be guaranteed confidentiality, whether they are the person being harassed, or a person who’s supporting them.

There must be no retaliation. “There has to be a statement that you will not be retaliated against if you come forward and make a claim of sexual harassment,” he explained.

One other thing: the policy must support appropriate and consistent consequences. It can’t be “one person is slapped on the wrist and another one gets fired” or one person is given training while another person is treated very differently.

The training must incorporate examples of what is considered harassment that relate to different jobs. “Someone who is on the loading dock is actually going to have different situations than a sales force out on the road,” he said.

Finally, a company has to be consistent in the way it administers its policy. This should help avoid repetitive complaints, which may come back to haunt an employer should it ever have to go into litigation.

Going to Trial

The company may have an affirmative defense in court in some cases if it has followed these practices and has a strong policy against harassment and a fair and confidential complaint procedure, according to Constantine.

Despite the company’s best efforts, it may still face a complaint. If that happens, there are several things a risk manager should do right away: have HR explain the firm’s process or procedures, any existing complaints and any prior history; tell the company’s carrier or broker about the complaint; obtain a defense counsel “who is appropriate, knows the jurisdiction, and has expertise in that area” and consider hiring a public relations firm. “You’ve got to get them on board early as well,” he advised.

Also, the company should identify potential mediators if it appears settling is an option.

In deciding whether to settle or try the case, it’s imperative for an employer to impartially assess all information, which is not always easy in situations that can be very emotional for everyone. “You know that person, you know you’re not wrong; it’s the right thing to go forward. It’s very hard to go back and to assess the risk, but time is money and the valuation of claim will just go up with more time. So, it’s important that you have a clear assessment of what that risk is before you go forward,” Constantine advised the risk managers.

Among the factors that need to be assessed are the venue, the judge, the witnesses, the mediator and the jury pool. “What’s very important is the credibility of the witnesses. If you go to trial, often the issue is not so much the facts, but do they believe you? How do they present? Are they trustworthy? Because if they’re not trustworthy, if they either don’t believe the claimant or they don’t believe you, that’s going to be a big outcome,” he said.

In all of this, the company’s insurer should be partnering with the employer, the broker and defense counsel. The insurer’s knowledge of judges and plaintiffs’ firms, along with its experience in assessing risk and devising strategies, should be of help.

“What is going to be a mediation strategy? What’s the settlement strategy? These are the things that the carrier can bring to the table, coming forth and trying to just assess the risk,” he said.

A company needs to place a monetary value of a claim, which Constantine acknowledged can be difficult. Cases go to trial, he said, because the two parties couldn’t agree and “someone has misjudged the value of that claim.” He said it’s important to notice the large verdicts because they are part of the risk. “Are you prepared to go down the road and risk that? Or can you get an objective assessment of the risks and liabilities to put a monetary value on it?” he asked.

The trend against nondisclosure agreements must be considered. “It used to be you could settle the claim and everybody would have to remain silent,” he noted. “Now, public policy is you may not get that and the person’s going to reserve the right to say, ‘No, I want this exposed, and I want other people to know about it,'” he noted.

Although claimants can voluntarily enter into nondisclosure agreements, that silence is probably going to have a monetary value, he added.