Magazine article Risk Management

New Laws, New Liabilities

Magazine article Risk Management

New Laws, New Liabilities

Article excerpt

It has been a busy year for legal changes that could affect your company's insurance and liability profile. Policyholders should review their coverages, and adjust policy terms and limits to confront these changes in liability exposure. Three cases deserve special attention.

The Lilly Ledbetter Fair Pay Act

The Lilly Ledbetter Fair Pay Act of 2009 effectively overturns a 2007 Supreme Court ruling (Ledbetter v. Goodyear Tire & Rubber Co.) that the statute of limitations for a wage difference discrimination claim starts from the initial decision to pay a female worker less money than a male counterpart, even if the pay disparity continued for years.

The Ledbetter Act restarts the 180- or 300-day statute of limitations dock each time a worker receives a paycheck that reflects a pay disparity, greatly extending the time in which a worker may bring a discriminatory pay claim against the employer. Although Ledbetter only dealt with sex-based pay disparity, the new law also includes claims based on race, age, religion and disability. Successful claimants can recover up to two years of back pay from the date the discrimination charge is filed.

Employers should consider whether their employment practices liability insurance (EPLI) policies adequately cover the new risks created by the Ledbetter Act. Some EPLI policies exclude or limit coverage for lost wages and back pay, except under limited circumstances. Also, because EPLI policies are generally sold on a claims-made basis, you should determine if your retroactive date extends back far enough to cover claims based on events that occurred years ago.

Delaware and D&O Indemnification

A 2008 Delaware court decision (Schoon v. Troy) held that a former director's right to advancement of expenses under a corporation's bylaws did not vest until an indemnifiable claim was asserted. As such, the corporation could amend its bylaws to eliminate the right to advancement of expenses with respect to former directors before a claim was made. In response, the Delaware legislature amended its General Corporation Law, Section 145(f), providing that a "right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired" by amendment after the relevant acts or omissions take place, unless "the provision in effect at the time of such actor omission explicitly authorizes such elimination or impairment after such action or omission has occurred. …

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