Workplace sexual harassment can impact the bottom line whether or not claims go to court.
Claims and Culture
harassment in the
workplace can lead
to millions in losses,
tarnish brands, and
erode customer and
By Michelle Kerr
For the past year, Fox News appeared to spend as much time making news as it did reporting it. Lurid accounts of sexual harassment involving the late CEO Roger Ailes and on-air host Bill O’Reilly alienated advertisers, stained the network’s reputation, and continue to cost 21st Century Fox millions on a quarterly basis.
Additional firings and suspensions this summer of top personnel – also for sexual
harassment – suggest that Fox’s problems are not yet in the rear view mirror.
In February, Uber stole some of the spotlight from Fox after a female former
employee published a startling blog post laying bare the company’s “bro culture”
where sexual harassment and discrimination were allowed to flourish.
Uber has since fired more than 20 employees, some of them senior executives,
and 40 additional employees were reprimanded or referred to counseling and
training. CEO Travis Kalanick was forced to step down in June.
The highly public nature of Uber’s and Fox’s woes is atypical. Approximately
15,000 sexual harassment cases are brought to the Equal Employment Opportunity
Commission (EEOC) each year. Those found to be viable are often settled quietly,
but at no small expense to the company, said Chris Williams, employment practices
liability product manager for Travelers.
Cases that reach a jury pose a new level of risk. Public disclosure of emails,
voicemails or other communications can be “tremendously embarrassing” for the
company, said Williams, and there is also a trend toward juries wanting to punish
companies that are aware of sexual harassment issues but failed to take any action.
“Whether it goes to court or not it still impacts their bottom line,” said
consultant and trainer Susan Strauss, an expert in workplace harassment and
bullying. “Morale drops, productivity drops and absenteeism increases. Employees
tend to suffer from an increase in the amount of physical ailments — everything
from colds to GI problems to heart attacks and migraine headaches.”
There can be severe psychological ramifications for the victims, she added,
including depression and suicidal feelings. Some victims might need to take FMLA
leave, or might require accommodation under the ADA.
All of which impacts the culture and productivity of the organization, she said.
MANY REMAIN UNCOVERED
“If word gets out … then they’ve got a poor reputation out in the community and
within their industry. It’s just bad all over. Then the employees wonder why isn’t
The potential for this level of damage, said Williams, should serve as incentive
to put risk management strategies and techniques in place.
Employment practices liability insurance can help defray the cost of legal
defense as well as costs related to judgments or settlements, making it an ideal
solution for any company that would be hard-pressed to pay such costs out of
pocket. Yet take-up on EPLI remains moderate.
Gross written premium for EPLI in 2015 was $2.1 billion, according to
MarketStance, despite a 2003 Best’s Review prediction that the EPLI market
would grow to around $7 billion “in the next few years.”
Growth of the segment has slowed,
partially due to some of the available
premium shifting into bundled
management liability policies that
include EPLI as well as D&O and
other coverages. A main point of
concern is that 60 percent of non-
buyers mistakenly assume their EPL
risks are protected under other policies,
according to Gen Re.
Larger employers, and those with the
most insurance savvy, are significantly
more likely to transfer their EPL risks
“A lot of companies don’t
engage in this behavior of
statistical analysis within the
HR practices. You do a lot of
auditing of everything else
within your business, but HR’s
kind of left out of that loop.”
— Edward McNally, chief underwriting officer,
• The indirect costs of a culture
of sexual harassment can be
• Many employers mistakenly
believe they have coverage for EPL
• Strong training programs can
improve a company’s risk profile.