Three Things Employers Should Know When Seeking EPLI Coverage For Sexual Harassment Claims
Haynes and Boone, LLP Press
At a time when tolerance seems to be an increasingly precious commodity, society can celebrate an awakening intolerance for sexual harassment. For all of the scandal and salacious detail dominating the media in recent months, there is the hope that victims of depravity can find empowerment and healing, if not justice, too. Countless public figures—once insulated from accountability by wealth, power and status—have been forced to reckon with the reality of their crimes and consequences.
But high-profile resignations and public apologies imply a finality and resolution for wrongdoers that is much slower in coming for those wounded by workplace impropriety. And for every victim, there are countless others—including families, friends, institutions and communities—who are swept up in the aftermath of sexual assault. Among those exposed to significant risk surrounding what can only be called a revolution in public attitudes and societal standards governing sexual harassment are employers, supervisors and others, who may be called to account for the bad conduct of deviant employees.
In anticipation of this kind of risk, employers have for decades purchased “employment practices liability” insurance (EPLI) or similar policies to protect against the cost of defending and paying damages for sexual harassment claims. Now with daily revelations of sexual assault committed by public figures of every political and professional stripe, employers are renewing their focus on EPLI coverage. By one account, spending on EPLI insurance is anticipated to increase by more than twenty-two percent (22 percent) between 2016 and 2019.1
But buying more EPLI coverage is not the same as recovering more from an EPLI policy in the event of a sexual harassment claim. The extreme social sensitivity associated with sexual assault claims may itself complicate recovery under an EPLI policy, depending on individual facts and circumstances. All other things being equal, however, there are three key issues that employers should consider in seeking recovery for sexual harassment claims under an EPLI form.
There are, in fact, any number of other issues that employers may encounter in pursuing EPLI coverage for sexual harassment claims. So-called “hammer clauses” may be implicated by a settlement to which the insured does not consent. There may be questions raised by the nature of underlying allegations about whether insured persons were acting in an “insured” capacity. Depending on policy terms and circumstances, important questions about the insured’s defense and the right to select defense counsel may also arise. Employers should also be careful to consider the alternative coverage that may be available for third-party claims for sexual harassment under other policies, including general liability policies, depending on the facts and circumstances of the claim.
A little more than three months ago, Hurricane Harvey brought devastating losses to businesses and their insurers all along the Gulf Coast. Today, there is another storm brewing for employers and their EPLI insurers. But by being attuned to the three issues outlined above, employers facing sexual harassment claims will be better positioned to maximize recovery from their EPLI insurers. If you have any questions about insurance coverage for sexual harassment claims or about EPLI coverage in general, please contact one of Haynes and Boone’s Insurance Coverage Practice Group partners listed below.
1 Danielle Paquette, More companies are buying insurance to cover executives who sexually harass employees, The Washington Post (Nov. 3, 2017). (“U.S. companies spent an estimated $2.2 billion last year on insurance policies covering the legal fallout from sexual harassment, racial discrimination and unfair-dismissal accusations. The market is projected to grow to $2.7 billion by 2019, according to MarketStance, a research firm that tracks insurance trends.”).
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Haynes and Boone, LLP Press
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