Tuesday, February 5, 2019
This industry action on insurance was recommended by Prof. Marci Hamilton in one of the earliest legal analyses of the #MeToo movement and how to redress the problem. See Blog, Systemic Solutions for Sexual Harassment Legislation and Insurance Industry Change (Nov. 2017)
Sixteen months into #MeToo, companies seeking sexual harassment insurance are facing intense scrutiny from insurers — a trend that could put pressure on firms to institute organizational change.
A recent report, authored by an insurance industry consultant, reveals new measures that insurers are taking to mitigate the risks of writing harassment policies, including decisions to exclude entire industries from their portfolios.
The increased vigilance comes as harassment complaints filed with the U.S. Equal Employment Opportunity Commission are on the rise, perhaps sparked by the wave of #MeToo revelations. The EEOC received 7,609 sexual harassment charges in its 2018 fiscal year, up nearly 14 percent from 2017. These numbers don’t include an unknown number of complaints settled by victims who never contacted the federal regulator.
Ten of the 32 insurance companies polled by Richard S. Betterley, publisher of the Betterley Report, said they were not underwriting the legal industry. Financial firms, including brokers, investment banks, and venture capital operations landed on the prohibited lists of eight insurers. Seven insurers said they’d blacklisted companies in the entertainment industry. Betterley shared a copy of his report, completed in December, exclusively with The Intercept and Type Investigations.
Betterley reached out to the biggest companies offering what is called “employment practices liability insurance,” or EPLI, which covers sexual harassment, sex discrimination, and other employee claims. Among the companies responding to Betterley’s survey were AIG, Chubb, The Hartford, and Travelers.
EPLI insurers christen their products with names like “ForceField” and “Employment Edge” and sometimes market their wares with #MeToo paranoia in mind. A blogger at a Manhattan insurance brokerage asks readers, “Is your industry a snake pit for sexual harassment claims?” At Nationwide, a webpage devoted to EPLI insurance warns that “a business is more likely to have an employment claim than experience a fire.” To attract clients for their expensive policies, which can demand seven-figure premiums for large firms, some insurers offer extras, such as free consultations with an outside law firm and sample employee handbooks.
Betterley said in an interview that, with dozens of insurers offering EPLI policies, being blocked by some major providers doesn’t mean that companies in frowned-upon industries can’t get insurance at all. But it could now mean agreeing to higher premiums and deductibles and demonstrating that their problems “are under control and have been addressed,” he said.
For example, a problem company might have to show that it had set up a confidential outside service for employees to report complaints anonymously, Betterley said. Or that the company had circulated anti-harassment policies and set up sexual harassment compliance programs. A large employer with a history of harassment complaints might see a deductible soar from $1 million to $5 million, he said.
Companies with high-profile executives, big-name stars, or iffy corporate cultures are getting increased scrutiny, several insurers who participated in the survey told Betterley. One insurer said it had become more cautious about underwriting “any account with celebrity involvement.” Another said it was taking a more in-depth look at companies’ track records on pay equity.
When Betterley began tracking the insurance market for sexual harassment and other employee claims in 1991, he said, there were only five companies in the business. “But EPLI really got big after Anita Hill testified in the Clarence Thomas hearings, when insurance companies saw a business opportunity,” said Paula Brantner, senior adviser to Workplace Fairness, a nonprofit organization that advocates for workers’ rights.