More Firms Are Buying Sexual Harassment Insurance Policies
U.S. companies are doing more these days to protect themselves--not from competitors but from their own employees.
Employee discriminatory claims have nearly quadrupled in the last four years, so more companies are taking out employment-practices liability insurance, also known as sexual harassment insurance.
“Up until about two years ago, you could not buy insurance for this kind of a claim,” said Marilyn Chernoff, president of Kelter-Thorner Inc., an insurance agency based in Michigan that specializes in employment insurance. Early policies usually covered the legal expenses of fighting employee discrimination claims but not the monetary judgment. Now, however, 70 insurance companies nationwide offer sexual harassment insurance to their clients, she said.
About 40% of workplace-discrimination lawsuits and claims involve sexual harassment allegations, according to the Equal Employment Opportunity Commission. Related claims include “glass-ceiling” cases, in which women and minorities contend that they can’t get promoted into top jobs, and pregnancy-discrimination suits.
“We have companies in about every industry who have this insurance. There isn’t anyone who isn’t buying it,” said Michael Kelter, vice president of Kelter-Thorner. Law firms and companies in the medical industry frequently purchase such policies.
“There seems to be a higher claim frequency from professional firms,” Kelter said. “Even in 1998, most management is white male,” which prompts the filing of more discrimination suits.
Although he doesn’t have a specific number, Kelter estimated that only about 5% of U.S. companies purchased the insurance four years ago. During the last three years, he said, that number has at least quadrupled.
Chernoff said the insurance covers employee-discrimination suits across the board, including suits alleging denial of pay raises because of pregnancy and maternity leave and lack of promotions for women.
Company spokesmen don’t like to talk about their insurance policies. “We recommend that any discussion about this insurance be kept at the upper echelons of the company,” Kelter said. “It’s the type of thing that if your employees know you have this insurance, you’re inviting lawsuits.”
High-profile sexual harassment cases have sent companies scrambling for insurance against employee suits. “We don’t have to do any advertising. It’s in the paper every day. Look around and there [are] claims going on. There is no way to stop them,” said Gina Higgins, senior vice president at JNH Marsh & McLennan insurance brokerage, based in New York.
Senate hearings on Anita Hill’s allegations of sexual harassment by then-Supreme Court nominee Clarence Thomas were pivotal, she said. “People knew that if you were discriminated against, you could go forward. But they didn’t know just how far they could go until Anita Hill.”
So what does this mean for employees?
Ellen Bravo, co-director of 9to5, National Assn. of Working Women, has kept a close watch on the increase in sexual harassment insurance coverage.
“The best insurance against sexual harassment claims is proactive leadership by management in preventing sexual harassment. Or stopping it quickly, should it occur,” she said. Bravo said the proliferation of insurance companies that carry sexual harassment insurance is a detriment to the workplace. “It is really disheartening to people who experience sexual harassment, knowing that their company’s remedies are focusing on insurance.”
But, according to Kelter, certain stipulations the insurance companies make before providing coverage help increase policyholders’ sensitivity to employees’ needs. Most insurance companies will work with the client, advising it and providing risk management. “It makes companies more sensitive because they become aware of what can happen” to them, Kelter said.
According to Loretta Worters, spokeswoman for the Insurance Information Institute, the number of employment cases involving civil rights filed in federal court more than doubled from 1992 to 1996, to 23,152 from 10,771. Despite that, she said, many companies still have not considered getting such a policy. “It’s kind of like if you take out a will, you realize you’re going to die.”
Reliance Insurance Co., based in Philadelphia, was the first company to sell this type of insurance.
Although the insurance at first just covered wrongful termination, Reliance in 1992 began to focus largely on discrimination in the workplace.
Before Reliance insures a company, it analyzes the firm’s employee handbook, policies and procedures and studies the number of suits it has lost or settled.
Lisa DeSimone, vice president for the financial products division of Reliance, acknowledged that the insurance is not a cure-all and said if a company buys a policy to substitute for good employment practices, “the losses will happen and you’ll have trouble keeping the coverage.”
