Research

Insurance Marketplace Realities: Employment practices liability

2018 Spring Update on Commercial Insurance in North America

April 12, 2018

Price prediction

  Trend Range
Employment practices liability (overall): No change or slightly up/down Flat to +5% (–5% to flat on excess for mid to large companies)
California: Up +5% to +10%
Media/entertainment: Up +15% to +30%

Key takeaway

Corporate culture will be more important than ever in the underwriting process. Expect increased scrutiny of internal policies and procedures regarding sexual harassment and gender-bias claims.

While social movements increasingly address workplace behavior, for now rates are mostly stable.

Rates are edging up slightly, with variance by geography and sector.

  • The average primary rate increase is 5% on the primary layers — with flat to slight decreases for mid to larger companies on the excess layers — unless loss experience, mergers and acquisitions, or changes in exposure dictate a greater increase.
  • In California, rate hikes continue to fluctuate between 5% and 10%, based on the heightened legal requirements there.
  • Media/entertainment clients are experiencing the most significant increases due to the industry’s surge of sexual harassment allegations. These clients have also seen reduced limits and separate retentions for sexual harassment claims.
  • The middle market is facing mostly flat rates, with some increases and a push for higher retentions in some instances.

The #MeToo movement/Weinstein effect cannot be ignored.

  • Given the heightened awareness of sexual harassment issues and increased scrutiny of corporate cultures, buyers should expect underwriters to take an extensive look at training, claims processing, and policies and procedures.
  • Recently proposed legislation could prevent businesses from enforcing mandatory arbitration agreements when employees allege workplace sexual harassment or gender bias.
  • The recently passed Tax Cuts and Jobs Act (H.R. 1) prohibits employers from deducting the cost of a settlement or payment related to sexual harassment or sexual abuse if the resulting settlement or payment is subject to a nondisclosure agreement.

Pay equity continues to be a high priority for most employers, both in the U.S. and abroad.

  • Although proposed changes to the EEO-1 report have been postponed indefinitely, many states have passed their own equal pay laws, in addition to laws that prohibit questions regarding prior salary during the interview and application processes.
  • Other countries, such as Germany, the U.K. and France, have passed legislation regarding the publication of pay data.

Major court rulings could reshape the employment liability landscape.

  • The future of class action waivers remains unpredictable as we await a Supreme Court ruling.
  • Whether Title VII prohibits sexual orientation discrimination is still unanswered — most recently, the Second Circuit joined the EEOC and the Seventh Circuit in holding that it does. As the courts are split, the Supreme Court may take up the issue, or the question may be answered through legislative action.

Joint employer liability remains a significant area of concern for companies in the franchise, hospitality and staffing industries.

  • Employers breathed a sigh of relief when the National Labor Relations Board (NLRB) overturned the broad Browning-Ferris standard, but the standard returned in force. However, the House of Representatives has introduced HR 3441 (the Save Local Business Act) in an attempt to narrow the definition of joint employment, offering hope to employers. Whether or not the bill is passed, employers should still expect claimants to allege joint employment.

The plaintiffs’ bar is not to be underestimated, especially in two areas.

  • Conflict over online hiring practices — some are alleging that online advertisements violate laws against age discrimination in employment advertising, recruitment, sourcing and hiring. They argue that certain social media sites deliver ads to site visitors based on various criteria with discriminatory effect.
  • Biometrics — biometric privacy legislation has recently been introduced in several states, though, to date, only three states have enacted such laws: Illinois, Texas and Washington. The Illinois law, which requires employers to provide notice and obtain written consent before collecting biometric data, has prompted a surge of class action claims filed against employers.