Magazine article Risk Management

Facing a Rising Exposure

Magazine article Risk Management

Facing a Rising Exposure

Article excerpt

More Companies Examining Workplace Practices

With concern mounting about rapid increases in the frequency and cost of lawsuits, a growing number of middle market companies are taking a very close look at the potential liabilities associated with their employment practices. Chris Maleno, assistant vice president of AIG's New Hampshire Insurance Co., says that in the wake of new legislation and publicity surrounding expensive litigation, more small- and mid-sized employers are examining how they can better protect themselves from allegations of discrimination, sexual harassment and wrongful termination.

"Employers are becoming concerned, and we're seeing more requests for coverage and employment-related claims," Mr. Maleno says. "We get about 280 submissions a week from middle market companies, and about a quarter of those are coming from companies with fewer than 50 employees. We're also seeing the claims frequency increase sharply, especially in the last three months of 1996."

Much of this increase has been fueled by publicity surrounding recent sexual harassment and racial discrimination lawsuits. More employers are wondering if they face a similar exposure, and the publicity is also inspiring employees to take legal steps against actions they perceive as wrong.

Employers are also concerned about a range of new laws governing workplace discrimination. In addition to the Civil Rights Act of 1991 (which allows sexual harassment victims to seek punitive and compensatory damages) and the Americans With Disabilities Act, a number of states and municipalities are passing anti-discrimination laws. Massachusetts employers, for instance, are required under a 1996 law to conduct sexual harassment prevention training, develop anti-harassment policies and instruct workers on how to file complaints with state and federal enforcement agencies.

In response to the growing exposure, more employers are adopting a combination of risk avoidance and employment practices liability insurance (EPLI) coverage. Middle market companies, which typically don't have the ability to retain a full-time human resources or legal staff, can turn to their insurance broker or carrier for employment practices guidance.

"During our underwriting process, we provide guidance and make sure an employer has loss control measures in place," Mr. …

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