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Employment Practices LiabilityAnd Litigation Trends

Employment Practices LiabilityAnd Litigation Trends Overview

• EPL Exposures• EEOC Class Action Initiative• Current Trends

Genetic Discrimination LegislationRetaliation ClaimsMental / Psychiatric Disabilities Age Discrimination ClaimsWhistleblower ClaimsSexual Orientation/Same Sex HarassmentFMLA / ADA Mixed Claims

• Market Update

EPL Exposures

Broadly speaking, EPL policies cover: Wrongful discharge, also wrongful demotion or discipline; Harassment, including sexual harassment, whether arising from

a “quid pro quo,” or hostile work environment; Discrimination, including but not limited to actions based upon

age, gender, race, color, national origin, religion, sexual orientation, pregnancy or disability;

Retaliation for exercise of statutorily protected rights; Defamation in connection with a perofrmance evaluation or

employee reference; Wrongful failure to promote or deprivation of career opportunity “Third party” (i.e., non-employee) civil rights claims.

Employment Practices LiabilityAnd Litigation TrendsEEOC Class Action Initiative

• Increased commitment on part of EEOC to filing more class actions over systemic discrimination.

• High cost of defending against class actions may prove burdensome for employers.

• Probable cause findings by EEOC on the

rise, from 2.3% (1992) to 6.1% (2003). • Settlements by EEOC have increased from

$136M (1995) to $272M (2005). Figure does not include private party

litigation, only cases brought by EEOC itself on behalf of aggrieved employees.

Employment Practices LiabilityAnd Litigation TrendsGenetic Discrimination Legislation

• Bill barring discrimination by employers & insurers based on genetic information nearing congressional approval.

• Proposed law would forbid employers from using genetic information to make hiring, firing and personnel decisions.

• Currently, no federal law that protects employees from this type of job action.

• Today, few EPL policies contain language

expressly covering such claims.

Employment Practices LiabilityAnd Litigation TrendsRetaliation Claims

• Fastest growing area of EPL litigation. About 30% of charges filed with EEOC in 2006 included charges of retaliation.

• In 2004, EEOC settlements in this area alone totaled $90 million.

• Supreme Court’s 2006 decision in Burlington Northern broadened retaliation to include job transfers or changes in work schedule.

• Plaintiff no longer needs to prove monetary

loss, only that the action could have a chilling effect on the exercise of workers’ rights.

Employment Practices LiabilityAnd Litigation TrendsMental / Psychiatric Disabilities

• The data suggests that plaintiffs with psychiatric disabilities are faring worse in court than those with physical disabilities.

• Surveys of such plaintiffs indicate that they are less likely to obtain monetary or other relief, and more likely to be dissatisfied with the adjudicatory process.

• This lack of a sense of efficacy on the part of plaintiffs could translate into fewer settlements and increased litigation costs.

• Conditions qualifying under ADA include:

– Schizophrenia;– Bipolar Disorder; – Depression; and – Anxiety disorders (depending on severity).

Employment Practices LiabilityAnd Litigation TrendsAge Discrimination Claims

• Age discrimination claims are likely to grow as the workforce continues to age.

• Supreme Court’s ruling in City of Jackson, essentially held that disparate impact claims are permissible under the ADEA.

• Some claims arising under ERISA also contain allegations of age discrimination.

• Most EPL policies exclude ERISA claims. However, coverage is available either through an endorsement to the EPL policy, or as a stand-alone “Fiduciary Liability” policy.

• Movement of energy industry away from Defined Benefit plans and toward 401(k) plans could spur additional age-based litigation.

Employment Practices LiabilityAnd Litigation TrendsWhistleblower Claims

• Sarbanes-Oxley prohibits retaliation against an employee for reporting violations.

• False Claims Act, which permits employee recovery of overpayments made by Government to a private party, also prohibits retaliatory action by employer.

• Claimants increasingly take advantage of state laws prohibiting retaliation for the exercise of statutorily protected rights.

Employment Practices LiabilityAnd Litigation TrendsSexual Orientation / Same Sex Harassment

• Same-sex harassment claims under Title VII increased by 14% in 2006;

• EEOC recently settled an older male-younger male harassment case for $765,000.

• Additionally, state and local laws increasingly prohibit discrimination on the basis of sexual orientation or preference.

Employment Practices LiabilityAnd Litigation TrendsFMLA / ADA Mixed Claims

• More workers using family leave to care for ailing parents.

• Claimants may also assert, under ADA, that

discriminatory action was taken because of employee’s relationship with disabled person.

• Talk in Congress of amending FMLA to mandate paid time off (currently employer’s discretion whether to offer paid or unpaid).

Employment Practices LiabilityAnd Litigation Trends Market Update

• Capacity: Over $1 Billion

• Contract Terms: Insurers are willing to modify/broaden the policy

• Punitive Damages: US – where insurableBermuda: Wrap policies

• Pricing: Declining