Underwriting employment practices liability in the #MeToo era

February 22, 2018 / 3 min read

Openly confronting and addressing sexual harassment are now at the forefront of American culture. In the wake of the sexual harassment scandals that have rocked Hollywood and the United States Congress as well as the emerging #MeToo and Time’s Up movements, many are wondering what the effects will be on industries outside of entertainment and government.

Between 2010 and 2017, there were 220,568 sex-based charges filed with the U.S. Equal Employment Opportunity Commission (EEOC). The four sectors with the most charges alleging sexual harassment between 2005 and 2015 were accommodation and food service, retail, manufacturing, and healthcare. The EEOC resolved 29,781 sex-based charges in 2017, and $135.1 million was paid, not including monetary benefits obtained through litigation.

The Me Too movement and insurance implications

Based on events over the past year, there may be an increase in the number of reports made to employers, charges made to the EEOC, and employment-related litigation. Fortunately, companies can take steps to mitigate the risks. During the underwriting process, insurers should consider whether a company has implemented the following measures:

Formalizing employment practices procedures and distributing an employee handbook

The organization should have a formal employment practices policy in place that is periodically reviewed by its human resources department and legal counsel. Employees should receive a copy of the handbook and have access to it through the intranet. The policy should address sexual harassment and clearly explain unacceptable behavior in the workplace. The policy should also include strong anti-retaliation provisions. Charges of retaliation were a factor in 72 percent of the sexual harassment charges filed with the EEOC in 2016.

The fear of retaliation may be a material reason why employees who are harassed don’t complain. Allowing the harassing behavior to continue may hurt the company culture, increase turnover, and reduce productivity.

Implementing reporting procedures

Procedures should be in place for employees to report instances of sexual harassment through a variety of easily accessible methods. Employees must believe they will not be subject to retaliation and that prompt and proper actions will be taken.

Instituting an investigation process

A formal investigation process that uses well-trained investigators should also be in place. Investigations need to be conducted in a timely manner, and investigators must be neutral and objective. When investigators determine that harassment has occurred, discipline should be prompt and commensurate with the findings.

Introducing employee training

Employee training must also be a part of the organization’s anti-harassment and anti-discrimination policy. Training should be interactive, conducted in person, and focused on unacceptable behavior. Additional training should be provided to managers and supervisors who need to respond to harassment or potential harassment situations. It’s essential that management understand and is provided guidance on how to handle these situations.

Promoting culture and leadership

It’s important for employees to know that senior management actively supports the organization’s anti-harassment policies. This may include participating in training, discussing the issue during town hall meetings, and receiving regular updates on sexual harassment complaints in the company. Organizations should also conduct anonymous employee surveys on sexual harassment in the company and share the results with senior management. Taking these steps may help senior leadership improve corporate culture and address any potential issues.

How ISO can help

Whether an applicant has adopted the measures mentioned above are just a few of the considerations that insurers should take into account when evaluating a company’s risk for sexual harassment. But just as important as understanding the risks is having the forms, rating information, and advisory prospective loss costs you need to serve a wide range of companies. ISO’s specialty commercial lines programs can help with your management liability and employment practices liability (EPL) requirements. For more information regarding our programs, please email the author.