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An increase in the number of harassment claims highlights the need for coverage and training.

Following the election of Donald Trump and his campaign comments on acts of harassment as “locker room talk” in 2016, a number of celebrities ranging from television stars to news media reporters and even U.S. Senators and House members, were caught in a “me too” movement of allegations by women of sexual harassment, assault and inappropriate activities. Some of these incidents had taken place as many as 40 years earlier.

Like the sexual activities of clergy that cost the Roman Catholic Church millions of dollars in settlements, the public learned that many of these accusers had been “paid off” by the alleged attackers, sometimes with public funds.

Headline and TV news coverage served as a wake-up call to employers and institutions that the days of male domination was coming to an end, a warning that caused many corporate human resource, legal and risk management personnel to wonder what would happen when some of their employees – or executives – were accused of being sexual predators.

The cost to defend

Defending such allegations is expensive, whether or not they are true, and that is part of the problem. If an employee or associate is wrongfully accused and is terminated, the entity is then exposed to a “wrongful termination” claim. If, on the other hand, the individual admits to the allegation(s) despite any statute of limitations, a settlement may be needed to resolve the matter, and the employee or associate terminated.

The cost of bad publicity alone can be horrendous, and the reputation of the organization (as well as the involved individual) ruined. Many entities are calling in human resource experts to conduct classes or training sessions with employees to try to prevent future situations. However, with the amount of turnover in today’s workforce, such classes are needed more often than annually.

Each claim must be investigated on its own merits, including the circumstances and the proof provided by the parties involved. (Photo: Shutterstock)

Examining the allegation

An accusation of some alleged actions that occurred more than a year earlier has to be suspect. There may well be valid reasons the alleged victim did not come forward sooner, but the delay and nature of the allegation may also have some ulterior motive, such as revenge, some psychological problem, or even blackmail. The accused employee or associate should be permitted a face-to-face encounter with the accuser, with the corporate representative (human resources, legal or risk management) present.

If an insurance company is involved, their claims representative should also be present. It must be determined exactly what is being alleged; this might be anything from innocent touching, such as a hug or (as occurred with President George W. Bush, a “neck massage” of the female German chancellor) some other innocent gesture that was neither sexual in intent nor physically harmful. On the other hand, it may be serious: genital exposure, inappropriate touching or groping without consent, or rape.

It is necessary to know what kind of proof the accuser has besides his or her own memory. If possible, record what each party says was actually stated at the time of the incident. “I told him to stop” might have a different effect than, “I was too shocked to say anything,” which the accused might have interpreted as consent when it was not.

Find out the circumstances of why and how the two individuals came to be alone (if they were) or whether there were witnesses. Was alcohol consumption or drug usage involved? If either party discussed the incident with anyone else, that person should be contacted.

What insurance coverage applies?

In many, if not most states, some form of mental anguish or emotional distress is considered to be an “injury” for purposes of a liability policy. However, it would be the rare case that would involve physical “bodily injury” or a covered “personal injury” under homeowners or commercial general liability policy. For employers named as co-defendants, however, depending on the policy language, an employment practices or D&O policy could potentially apply to an allegation of sexual harassment by an employee, former employee or outsider.

The problem with these and other liability policies is that a coverage denial, if the coverage would otherwise apply, cannot be made if the allegations of the claim or suit are denied by the accused person and are potentially “groundless, false or fraudulent,” even though that phraseology appears only in the homeowners liability coverage forms.

If a claim might fit the coverage, the insurer may have to provide an investigation and defense under a reservation of rights until it is first determined whether the insurance does apply to the allegations, and second, whether the insured person is actually liable. In sexual abuse, harassment or similar allegations of a wrongful act, evidence of the validity of the claim would bar coverage.

A Homeowners Section II-Liability or Personal Liability form usually contains specific exclusions for “bodily injury” that arises out of “sexual molestation, corporal punishment or physical or mental abuse.” (The commercial general liability policy does not have such an exclusion.)

While the definition of sexual harassment might include sexual molestation or mental abuse, harassment is not a term used in these policies and can have a wide-ranging definition, from any inappropriate spoken words, observation of a sexual nature, inappropriate touching that does not injure, or a misconstrued gesture. The Webster’s New World Dictionary defines “harass” as “to trouble, worry, or torment, as with cares, debts, repeated questions, etc.” and “to trouble by repeated raids or attacks, etc., harry.”

Sexual harassment is not separately defined in the Second Edition. When one party accuses another of sexual harassment, there is no particular legal definition beyond the typical understanding that it means “unwanted sexual advances” or requests for sexual favors and other verbal or physical coercion or harassment of a sexual nature. It is, however, a form of sex discrimination in violation of Title VII of the Civil Rights Act of 1964, subject to EEOC investigation and penalties for any employer who allows it to occur, another motivation to stop it before it occurs.

A directors & officers liability (executive protection form) covers a “wrongful act,” which is often defined as “(a) any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed, attempted or allegedly committed or attempted by an Insured Person in his or her Insured Capacity, or for purposes of coverage under Insuring Clause 3 by the Organization, or (b) any other matter claimed against an Insured Person solely by reason of his or her serving in an Insured Capacity.”

However, an exclusion (e) applies to any actual “bodily injury, mental anguish, emotional distress, sickness, disease or death….” Further, it could apply vicariously against an officer or director if committed by someone under their supervision, whether the officer or director was aware of the harassment or not.

Employment practices liability forms also use terminology such as “wrongful act,” although as both these forms and D&O forms are “claims made,” the date of the alleged act is very important in determining if coverage might apply. Further, the definition of “wrongful act” implies that the claimant/plaintiff is or was an employee, not an outsider, and exclusions apply to “criminal, fraudulent or malicious acts….”

Judge's gavel laying on a pile of money

Insurers should consider the possibility of mediation or a settlement for some claims depending on the circumstances involves. (Photo: Shutterstock)

Determining Damages

The insurer must be cautious about assessing damages; in a well-publicized case, a jury might award millions of dollars in punitive damages. Often the claimant may actually have few verifiable damages beyond alleged bad memories or emotional discomfort. Very few executives, officers or employees, if there is no coverage, can afford the costs of such litigation, win or lose.

But if the insurer is defending a questionable, or even doubtful, claim under a reservation of rights where the insured person has denied the allegations, unless there is a “written consent to settle” clause in the policy, the insurer should consider a possible opportunity for mediation or settlement, even though the accused has not been proven guilty or denies fault. That said, if the allegations and demands of an employee or former employee have either blackmail, revenge or retaliation for a legitimate termination or other disciplinary action at their root, the claim should be denied and vigorously defended in court unless liability is proven.

It is likely that events in late 2017 will lead to an increase in sexual harassment claims or lawsuits; many may be barred by statutes of limitations, one defense factor that should be examined early in the claim. Another involves the relationships between the accuser and the accused, and whether the harassment is verified.

If insurance coverage applies, the claims representative (attorney or adjuster) should proceed with extreme caution, usually under a reservation of rights agreement, discussed and acknowledged by the accused. For individuals not in an employment situation, additional caution is needed, and every aspect of policy language should be fully understood by all parties.

Author: Ken Brownlee, CPCU
Source: Property Casualty 360

Bad things sometimes happen to good companies, including nonprofits.

Whether it’s turmoil in the executive suite, a failed fundraising campaign or financial fraud such as embezzlement, every organization hits bumps along the way.

And many of those organizations make it worse with their response (or, more often than not, lack thereof) to a crisis.

Organizations get in trouble when they try to hide bad news. Granted, it’s human nature to protect oneself, but trying to tamp down, declining to comment about or even concealing bad news is a big mistake.

It’s better to get things over and done with – kind of like ripping off a bandage with one fell swoop or swallowing nasty medicine in one gulp – than hoping the story simply goes away.

Consider the illustrative case of President Richard Nixon.

Say Nixon had come forward after the Watergate break-in and said the burglars were affiliated with his re-election campaign, that he was embarrassed to be associated with such a terrible thing and he was taking appropriate action.

There would have been condemnations galore for a week or two and lots of navel-gazing commentary from the media. And then it would have largely been forgotten, with Nixon cruising to an easy election win in 1972.

Instead, Woodward and Bernstein were there to tug on loose threads that caused a presidency to unravel.

Now consider what happened in 2012 to breast cancer foundation Susan G. Komen for the Cure when it announced plans to stop giving money to Planned Parenthood for breast examinations and related services.

A deluge of criticism occurred on Komen’s own Facebook page, with many one-time proponents pledging to drop their support. Meantime, the backlash was just as bad on Twitter, and the mainstream media got in on things, too.

So, what did the organization do?

It did nothing for 24 hours, which is an eternity in today’s world of continuous news cycles. And the organization’s response was tepid and did little to dispel accusations that the funding decision was prompted by new Vice President Karen Handel, a known abortion opponent.

Several days later, Komen reversed its decision with a weak statement that failed to smooth ruffled feathers. A few days after that, Handel resigned.

Still, the damage was done, as local events were canceled, other executives resigned and fundraising suffered. Contributions, which include donations and corporate sponsorships, fell 22 percent from about $164 million in the fiscal year ending March 2012 to $128 million a year later.

By leaving rumors floating around and questions unanswered, you’re asking for trouble. That’s to a reporter what a red flag is to a bull.

Left in the hands of a tenacious media, the bad news will come out in drips and drabs, turning what could have been a short-term blast of negative publicity into a long-running saga.

Meantime, someone else is controlling your message, which is something you definitely don’t want to happen.

Another reason for getting the bad news over and done with as soon as possible is the chance to appear forward thinking. Take responsibility for the problem, apologize and announce steps to correct it. People respect honesty and action.

Consider Johnson & Johnson’s textbook response in 1982 when seven people died after taking Tylenol laced with potassium cyanide. The company pulled the product from store shelves, shut down production and assisted police in the hunt for the killer. Afterward, the company reintroduced the product with new tamper-proof packaging and offered discount coupons.

The brand quickly recovered.

Nonprofits have an extra burden in times of crisis: Fair or not, nonprofits are held to a higher standard than for-profit companies and are expected to operate efficiently and honestly.

Still, the PR game plan for a nonprofit is not really different from what a for-profit operation should do.

To minimize damage, every organization needs to adopt the Boy Scouts motto of “Be Prepared.”

The first step is to actually plan in advance. Consider possible crises and develop responses. Create an action plan that includes a comprehensive media contact list. Assign authority for various tasks, then practice the plan on a semi-annual basis.

Once a crisis hits, it’s crucial to act quickly so you can help control the message. In addition, it makes the company appear to be proactive in solving problems.

Designate a single spokesperson – preferably someone fairly prominent in the organization – so the messages remain consistent. This person needs to be accessible and a well-polished speaker. Just in case, have a backup spokesperson.

Before speaking, be prepared. Anticipate key questions, but only divulge information as required. Never speculate and, most importantly, NEVER lie.

Make sure to describe steps taken to alleviate the problem – and to make sure it never happens again. Don’t play the blame game. Apologize if needed.

Given its immediacy, any response requires social media interaction. Monitor social media responses to see what’s being said. Make sure to respond to and correct any erroneous information being disseminated by others, but don’t be condescending or critical.

Perhaps the most important thing in dealing with a crisis – and the thing that many organizations repeatedly avoid – is taking responsibility. Be quick to acknowledge the problem, express concern, and detail how the company is going to deal with it.

Once the plan is implemented, it’s not time to relax. Issue updates as warranted; even if there’s no news to report, avoid “radio silence.”

And when the crisis is over, thank the public and any people or organizations that helped solve the problem. Reinforce the sense of community.

Some other tips for crisis management:

  • Don’t forget your own employees. Make sure they know things first.
  • Be humble.
  • Afterward, review your company’s response, and adjust as needed for the future.

So, let’s see how this might this play out for a nonprofit that finds one of its top executives accused of embezzlement,

For argument’s sake, let’s say that “Company X” just discovered its chief financial officer had embezzled $3 million over a five-year period. The media is aware of the embezzlement and police have told the organization that the CFO is going to be arrested. Rumors have begun to circulate, and would-be donors are having second thoughts.

Clearly, this is a tough situation – and Company X needs to take immediate action.

Announce the unpaid suspension of the CFO; terminate that executive as soon as charges are filed.

Hold a press conference to describe what is happening, the impact and also discuss how the organization is going to make sure the incident never happens again – in this case, some sort of steps that add checks, balances, and oversight to the accounting process.

In the days and weeks that follow, issue occasional updates and offer media access to key organization officials (but make sure they’re well coached about what to say).

Throughout the process, remind both the press and the public about the good things the organization has accomplished and upcoming goals and events. Use “trust” as a theme in all communications, and repeatedly touch upon unrelated positive things that are happening.

Ultimately, the organization is going to take a hit, but with proper planning and execution that hit will be minimal, the press will move on to other topics and the bad feelings will fade from the public mindset.

At that point, another PR program reinforcing the organization’s good works – and announcing new ones – is in order, but that’s a topic for another article.


Author: Andy Gotlieb
Source: Nonprofit Information

Combating Sexual Harassment in the Workplace

A powerful Hollywood mogul. A high-profile television news host. A well-known actor. A sitting U.S. Senator. From celebrities to politicians, they began to fall. It started with a few voices speaking up and has cascaded into an avalanche of sexual harassment and misconduct charges that has continued well into 2018. While many of the sexual harassment charges leveled in the #MeToo movement so far have been against household names and powerful elites, there is a sense of both fear and anticipation that similar allegations are coming to corporate America. It is a fear well-placed—tales of sexual harassment in the workplace have always been plentiful.

In 1996, 23 female employees sued Smith Barney, claiming sexual harassment and pay discrimination. More than 2,000 women joined the so-called “boom boom room” suit, which was named for the company’s practice of hiring strippers to celebrate the birthdays of male employees. The settlement came to $150 million.

In 2011, it was UBS Financial Services under fire. A former sales assistant sued the company after being sexually harassed by a supervisor. The suit alleged that the woman was then fired after complaining. The jury awarded her nearly $10.6 million.

In 2012, one of the largest payouts to a single claimant was made to a physician’s assistant who endured repeated demands for sex from the doctors she worked with, including one doctor who allegedly stuck her with a needle and called her stupid. A jury awarded her $168 million.

Women are not the only victims of sexual misconduct. Actor Terry Crews recently revealed that he had been the victim of sexual assault by a high-powered Hollywood agent. In 1999, a male assistant manager at a New Jersey grocery store charged that a female assistant manager made unwanted sexual comments to him, touched him inappropriately, and flashed body parts at him while on the job. In a Time article in May 2017, journalist Josh Levs recounted being sexually harassed by a female supervisor on a project who drew photos of what she guessed his anatomy looked like and regularly pressured him for sex.

Harassment by the Numbers

It is difficult to determine how often sexual harassment occurs in the workplace. Most claims are brought privately and many settlements require non-disclosure. In a recent study conducted by Cosmopolitan, 81% of the more than 2,200 women surveyed had been verbally sexually harassed at work, 44% said they encountered unwanted touching and sexual advances, and 25% have received lewd texts or emails. Of those, only 29% reported it.

Of the more than 2,200 women surveyed,

81% were verbally sexually harassed at work,

44% said they encountered unwanted touching and sexual advances, and

25% have received lewd texts or emails.

Of those, only 29% reported it.

The Equal Employment Opportunity Commission (EEOC) defines harassment as conduct that is “severe or pervasive enough to create a work environment that a reasonable person would consider intimidating, hostile or abusive.” In 2016, employees filed 12,860 charges of sexual harassment against employers with the agency. Of those, the EEOC settled 9.4% of the cases (698) to the tune of $40.7 million.

Now that the current climate offers a more receptive environment for victims to tell their stories, companies can expect even more reports. Indeed, Jennifer Sandberg, a partner at employment law firm Fisher Phillips, has already noted an uptick in the number of calls from employers regarding sexual harassment claims.

Despite the progress in anti-discrimination laws and the clear cost of non-compliance, many companies are missing the mark on sexual harassment awareness and prevention. “Companies don’t seem to be addressing it adequately or are not aware of the toxic environment that is being created today,” said Loretta Worters, an insurance expert formerly with the Insurance Information Institute. “It’s pervasive in every industry, including insurance.”

Lance Ewing, executive vice president of global risk management and client services at Cotton Holdings, agreed. “No company is immune. If you have human beings working for you, you’re not immune.”

Every corporation has its own cultural rhythm and pace, Ewing said, and within those cultures, the moral compass appears to be shifting “Even in the high-profile cases coming out now, people are saying what was acceptable then is not acceptable now,” he said.

Open Door to Litigation

Knowing about the problem and doing something about it are two different things, however, and companies often increase their risks by ignoring bad behavior, Sandberg said. In larger corporations, this could lead to costly class action suits. In smaller, privately-owned companies, cases can be further complicated as the offender may be the head of the company. With no one to report misconduct too, there is little recourse for employees but to sue, she said.

Another issue is that, too often, companies treat harassment reports the risk as a one-off issue. This is a mistake. “You can’t put up a poster and put on a one-day training session and think you’re done for the year,” Ewing said. He advocates for a continual process that becomes an integral part of human resources and risk management practice.

Companies are also leaving themselves exposed to risk by not updating policies and procedures to address harassment of all kinds. “Having a policy that only addresses sexual harassment or having no harassment policy is a problem,” Sandberg said because the policy could be too narrow. Instead, she recommended crafting a thorough policy that covers all types of harassment.

“Companies leave themselves open to legal action by not having the proper HR procedures in place,” Worters said. “This is particularly true for small companies that may not even have an employee handbook. In light of what has happened this year, companies, both large and small, need to be ever more aware of their vulnerabilities.”

Policies should also take into account potential reporting difficulties. “Another mistake companies make is having a policy that tells employees to report incidents to their immediate manager,” Sandberg said. “Ninety percent of the time, it is the manager who is the problem.” She recommended that policies instruct employees to direct complaints to the human resources department or a high-level executive.

What companies absolutely cannot do is neglect to take disciplinary action. “Many companies overlook inappropriate behavior with a slap of the hand, without a paper trail,” Worters said. “This doesn’t help their cause. Allegations of sexual harassment affect a company’s bottom line directly through litigation and settlement costs and indirectly through redirection of management attention, reduction in employee morale and loss of shareholder confidence.”

Addressing Harassment Openly

Perhaps that threat to the bottom line is why some companies are proactively addressing sexual harassment. Birgit Marie Liodden, director of Nor-Shipping, a Norwegian maritime trade fair, stunned the industry in November 2017 when she penned an open letter warning of the problems of sexual harassment within the maritime industry. Liodden shared a number of instances in which she was the victim of such behavior and called for the maritime industry to openly discuss sexual harassment within their organizations. “Start discussing this topic within your organization and network to find out if you need to change the company culture,” she wrote in an article in Splash 24/7, an industry trade publication.

Organizations must treat sexual harassment and misconduct as seriously as they do other risks. Companies, especially larger corporations, have the law of large numbers litigation. “You take a 60,000-employee company or a 60-person company—all of them have the potential exposure,” Ewing said. But the larger the company, the larger a problem can grow.

Audits should be a routine part of the employment practices component of the business, he said. Companies should audit on a monthly basis to review and evaluate policies and address any situations as they arise. “We audit our financial books and policies and procedures all the time because we have Sarbanes-Oxley. Why wouldn’t we audit from an employment practices liability standpoint?” he said. “Instead, we believe in our beautiful policies and procedures and we toddle off to the courtroom.”

An audit of those policies could not only cement a defense but go a long way toward helping both companies and victims resolve issues without litigation. Part of that means revamping how these claims are addressed. Sandberg believes the first step in the process should be designating who employees can report situations to.

The second step is to foster a culture of awareness. Companies need to go beyond employee training and put out annual statements on their harassment policy. “That action reiterates the company’s commitment to a safe work environment,” she said.

Another way to help prevent problems is to look for problematic behavior patterns. “Don’t look for incidents,” Ewing said. “You’re looking for an individual or individuals who continually have a pattern of issues in the workplace, and sometimes outside the workplace.” He suggested reviewing social media accounts, if allowed, to see if the individual’s behavior outside of work could suggest a problem within the workplace.

Ensuring Proper Enforcement

When a sexual misconduct claim arises, a company’s policy is critical to how successful the employer will be at addressing it. “Such a policy is explicitly recommended by federal regulations and, to be effective, should contain a definition of sexual harassment and harassment; examples of sexual harassment or harassment; a statement that sexual harassment or harassment of any kind is prohibited by the company and will not be tolerated; information on how claims are investigated; a statement that retaliatory action will not be tolerated; and a statement that corrective action will be taken,” Worters said.

Failure to adopt a sexual harassment policy could be detrimental to the employer in any investigation or litigation. “The absence of such a policy could be used as evidence that a harassing employee had apparent authority to engage in his or her misconduct, a finding that could trigger employer liability,” she said.

Once the policies are in place, companies should determine what else is needed to both prevent and respond to sexual harassment. The first step for risk managers should be to go back as far as possible and review the hiring process. By teaming with human resources, risk management can get a better sense of the application and screening processes. “The problem starts when human resources hire the wrong person,” he said. “That’s what plaintiff’s lawyers are going to look at. Do you have a history of hiring these types of people?”

Risk management should also keep a watchful eye on the culture in their organizations and not be afraid to push for changes. “Sometimes it’s okay to pull a couple of weeds,” Ewing said. “But if they keep growing back, there’s a problem with the soil.”

Enforcement does not need to be complicated. “The right corrective action is whatever it takes to make it stop,” Sandberg said. “Get expert help and get it early on. Get the right person with the experience to help you out.”

Overall, organizations need to give employees avenues through which they can voice concerns and feel like they are being taken seriously. “If you experience something, say something,” Ewing said. “It’s not something to be tolerated like a festering wound.”

Author: Lori Widmer

Source: RiskMagazine

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