Headlines in recent years have highlighted the ongoing issues and challenges surrounding inappropriate behaviour and workplace harassment.
Incidents like those that took place at the infamous Presidents Club dinner in 2018 and social movements such as #MeToo highlight the increasing risk of liability and damage employers and businesses may be exposed to by their staff.
Consequences within the industry
The consequences of inappropriate behaviour among the Big Four professional services firms were revealed in December 2018 when Deloitte announced it had removed 20 partners in the past four years for incidents such as sexual harassment and bullying. PwC and KPMG also revealed they had dismissed some of their UK partners for similar reasons.
A survey undertaken by HFM Week found over 60% of female employees have experienced workplace harassment, with a further 49% reporting inappropriate behaviour from male colleagues and peers at industry events.
As this problem is being addressed more openly in the business world, and action is taken where appropriate, the question of insurance to protect a company from the damages incurred in the wake of accusations of inappropriate behaviour is becoming increasingly important.
The dismissal of a guilty individual often causes extensive and highly visible damage to an organisation's brand, reputation and share value. This makes the case for insurance against such damage - and the post-incident support it may provide - more viable.
How could this impact an employer?
There are some key areas in which businesses and employers are commonly damaged following these types of incidents – particularly those that are high-profile. These include:
- Back pay
- Front pay
- Compensation
- Punitive damages
- Legal fees
- Reputation damage
- Loss of clients
As is the case with many situations requiring an insurance solution, the protection against such a varied profile of risk is made more valuable by the sudden nature in which damage can occur post-incident.
This is particularly true in a digital environment where social media can quickly and virally share an event – and the company name associated with it.
What protection is available and suitable?
Entity Employment Practice Liability Insurance is designed to protect a firm against allegations of breach of employment contract, unfair or wrongful dismissal, discharge or termination of employment, failure to employ or promote, deprivation of career opportunities, sexual or workplace or racial or disability harassment of any kind.
While it may seem an extreme form of protection, the speed at which a story involving any one of these claims can be shared means that both legal and public relations support is necessary. These allegations stick to firms and are taken very seriously by current and prospective investors.
Combining protection
Claims like these are often targeted and based around specific individuals. This is in addition to the further damage that is incurred to the business and may mean more protection is required via a suitable insurance product.
Directors' and Officers' Liability Insurance may be needed in such cases as it covers the costs of claims for compensation against the insured individual. It can help ensure all parties involved – including the wider business – are protected while the incident reaches its lawful conclusion.
It is important to consider the fact that these policies are commonly sold on a claims-made basis, where only claims made during the period of the policy are covered. This can be problematic for a business purchasing a policy for the first time, or one that is changing insurer.
Most claims-made policies have a retroactive date, which means claims made prior to the policy period are not covered. This makes a proactive approach to this insurance a priority for businesses that believe they may be at risk from damage caused by incidents of inappropriate behaviour.