More Firms Insuring for Harassment

Sexual harassment insurance sales are booming as the Paula Corbin Jones lawsuit against President Clinton and other high-profile cases send corporate America running for coverage.

Companies are spending as much as $100,000 a year in premiums for employment-practices liability insurance, the type of policy that covers sexual harassment and other employment-related lawsuits, experts say.

“It’s the fastest-growing policy we are selling,” said David Sterling of Sterling & Sterling, a New York insurance brokerage. “They are buying this like it’s going out of style.”

The Society for Human Resources Management estimates that 60% of companies have been the target of at least one employment-practices liability lawsuit in the past five years.

Sterling’s firm sells insurance to about 1,000 mid-sized companies. “Over the past six months, we have seen over a dozen claims. A year earlier we had maybe four or five. Before three or four years ago, we received maybe a couple in 20 years,” he said.

“It’s the new tort that everyone’s going after,” he added.

According to the Insurance Information Institute, employment cases involving civil rights filed in federal court more than doubled from 1992 to 1996, climbing from 10,771 to 23,152.

Lois Schlissel, an employment-law attorney in New York, said sexual harassment cases have “easily tripled over the past three years.”

High-profile plaintiffs like Jones have helped put the issue in the public eye.

“The Paula Jones case has highlighted certain issues corporate America is trying to address,” said Jack Kuhn, a spokesman for Chubb Corp., a large multinational property and casualty insurance company.

Corporate America has felt the growing awareness of sexual harassment keenly.

Last November, Smith Barney--now Salomon Smith Barney Inc.--settled a landmark discrimination case alleging that female workers were being groped in a Long Island office. Under the agreement, plaintiffs in the securities industry will no longer have to have their claims settled by binding arbitration.

But Kuhn said he believes the growth of sexual harassment lawsuits is also the result of an erosion of loyalty between company and employee, especially in the face of corporate downsizing.

“I don’t think any recent college graduates see themselves as retiring from the first company they go to work for,” he said.

Major providers of employment-practices liability insurance include Chubb, Reliance Group Holdings, AIG Fireman’s Fund and Lloyd’s of London.

Although Kuhn would not say how many Employment Practices Liability policies Chubb sells, he said he expected the business to keep growing.

“We’ve had substantial growth in the past three to four years and we expect this to continue in 1998 and 1999,” Kuhn said.

Industry experts say the majority of harassment cases are settled out of court.

In a related kind of case, the Insurance Information Institute said the average award for sex discrimination was $106,728 in the 1988-1994 period. However, the legal fees can well exceed that amount, according to Sterling.

Sterling said most mid-sized companies are taking out policies of $1 million to $25 million, for which they pay premiums of $5,000 to $15,000. The policies usually have a deductible of $25,000.

The insurance covers the defense costs, judgments and settlements but may not always cover punitive damages, fines or penalties.

The coverage usually encompasses the corporate entity, employees, former employees and directors and officers.