The current uptick in corporate mergers could also boost the number of suits. To squeeze out so-called synergies from a merger deal, managements could choose, as they have in the past, to lay off large groups of employees. Some of those employees, including older workers and minorities, are members of protected classes under Title VII of the Civil Rights Act of 1964. Blanket layoffs could thus spark wrongful termination suits. That's why many companies now involve their human resources departments in merger negotiations, notes Higgins.
Employers looking to outsourcing as a way to shed bias-related risks are on the wrong track, she also suggests. That's because contingent employees, as well as permanent ones are still within their rights to sue companies for discrimination.
The Marsh report, which polled executives from nearly 1,900 small, medium, and large companies, uncovered several other interesting employment-practices risk trends. One is that the fastest growing employment-practices charge over the past three years has been age discrimination—up nearly 20 percent between 2000 and 2003. The surge in such claims, which represented 23 percent of all the cases tracked by EEOC, is a reflection of the aging workforce, surmises Higgins.
Overall, race bias, which represents 35 percent of all 2004 claims, and retaliation, representing 28 percent of all charges, are the two largest lawsuit categories. Retaliation suits, which charge employers with striking back at an individual for filing a bias charge, are likely to rise. Since they're new to the EEOC tracking system, the commission's numbers don't reflect the whistleblower claims that have become prominent over the last few years.
Higgins says that risk managers that once attached employment practices extensions to their directors' and officers' (D&O) insurance policy are now are buying stand-alone employment-practices policies. In that way, D&O coverage limits won't be eroded by the increasing number of EPLI claims, she says. And companies now need all the D&O protection they can get, since those policies are being hit hard by shareholder lawsuits stemming from the Sarbanes-Oxley Act.
Betterley says that now that D&O is “such a mess,” it makes more sense to uncouple the two types of coverage. He points out that EPLI is a complex line, best served by underwriters and adjusters specializing in the coverage, rather than those who focus on D&O as well.
One thorny question involving the management of EPLI claims is whether to settle or not. While adjusters that don't specialize in EPLI might push insureds to take a hard-nosed approach and press on for a jury trial, that might end up attracting "copy cat" suits, Betterley noted.
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