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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


In any contractual relationship, it’s important for the parties involved to properly allocate their combined risks.

Contractual risk transfer identifies critical exposures and assigns responsibility for preventing and paying for losses — but it’s not always an easy process. However, protecting your organization’s assets and bottom line is worth the effort.

A critical challenge

Managing contractual risk can be challenging, increasingly so as additional insured status has been eroded over time. In 2013, for example, ISO introduced new additional insured endorsements to commercial general liability policies that restricted limits afforded to additional insureds to those specified in a contract. That has made the underlying contract — and the allocation of contractual risk — more important than ever before.

A few reasons why risk professionals should pay close attention to contractual risk:

  • To answer leadership’s questions. After a loss or disruption, the first question from the C-suite usually is: “What does the contract say?” Risk professionals who properly manage the contractual risk process — in conjunction with their legal counsel — can confidently answer this question.
  • To build better relationships. An organization that is known to be diligent in managing contractual risk can send a message to vendors, suppliers, contractors, and other parties that it is serious about risk management. And that can drive more risk-conscious behavior by those other parties, contributing to better results for everyone.
  • To avoid protracted legal struggles. Resolving a dispute about the responsibility for managing risk can be costly and disruptive to your business.

Best practices

To build a more effective contractual risk transfer program, organizations should consider the following best practices:

  1. Create standard contractual risk terms. These should be thoroughly vetted and regularly updated. They should include tiered requirements that stipulate higher limits of insurance for more hazardous operations undertaken by your company or a counterparty to a contract.
  2. Train procurement professionals. Your procurement team should understand these standardized terms and why they’re important to risk management.
  3. Require authorization to bend terms. Specific business reasons may occasionally require changes to contract terms, but there should be a protocol for such deviations.
  4. Establish guidelines for when to involve risk management. For example, you might require that risk management be consulted on any contract that exceeds a certain dollar value or falls outside the scope of normal activities.
  5. Enforce collection and review of certificates of insurance. No work should begin until you have all necessary certificates of insurance in hand.

For more on this topic, listen to a replay of the Marsh webcast, Fortifying Your Contractual Risk Transfer Program.

Author: Janice Collins
Source: PropertyCasualty360


Financial disaster preparedness begins with a thorough understanding of the risks facing the organization. As an organization grows and its operations become more intricate, its risks change and tend to become more complex. Accordingly, risks need to be assessed continuously, an exercise typically orchestrated by the risk manager with support from throughout the company.

Beyond the many challenges of physical recovery following a catastrophe, additional problems affecting financial recovery often occur because key areas of risk were overlooked or their potential impacts were not fully understood. For example, a real estate services provider had adequate liability coverage for cyber breaches but did not anticipate the potential financial impact of an interruption of its IT systems. The company experienced a cyber intrusion that shut down its servers for 24 hours, resulting in a multimillion-dollar loss that was only partially covered by insurance.

Risks that are not identified or clearly understood in advance are difficult to manage in a cost-effective manner following a catastrophic event. Such risks expose an organization to unexpected and often avoidable financial losses. The process of risk identification, analysis, mitigation and transference is a critical part of the financial preparedness process.

Once risks have been identified and analyzed, seven key areas of financial preparedness must be addressed:

1. Planning for business continuity

The foundation of financial preparedness, business continuity planning entails understanding how, and to what degree, your organization will be able to service its customers and maintain solvency in the event of a major shutdown of operations or other catastrophic event. This can include a variety of actions, such as fulfilling orders using existing inventory, receiving support from other company locations, outsourcing production and/or services, and setting up a temporary location. These actions help ensure continuity of operations and, in doing so, also help mitigate the loss.

In planning for business continuity, it is important to consider unexpected occurrences and challenges. Catastrophic losses can occur in ways that were not anticipated or previously experienced by an organization. For example, as a result of Superstorm Sandy in 2012, a company lost two of its major data centers, one located in New York City and a backup center located miles away in New Jersey. The company’s management never anticipated the possibility of a hurricane impacting both data centers at the same time. Organizations must explore a wide range of possible causes of loss and the resulting impacts when assessing both the maximum possible and the maximum probable loss.

2. Understanding employee retention

Retaining key employees and other members of the workforce following a catastrophic event is essential to the continuity and restoration of a company’s operations. Organizations must assess whether or not insurance will be necessary to cover labor costs following a catastrophic loss.

3. Understanding and mitigating costs

In addition to labor, there are many other costs that will continue following a catastrophic loss. The key to managing these costs is assessing the organization’s (and each facility’s) structure of variable and fixed costs and determining how they will likely be impacted following a partial or complete shutdown of operations.

By understanding and assessing continuing costs, the organization can better plan for mitigation of those expenses and required insurance coverage. The preparation of a simple business interruption values worksheet does not typically go deep enough—the process requires a detailed understanding of operations and related costs, and ways they will be impacted following a loss.

4. Identifying other sources of potential funding

Insurance is typically the first line of defense following a catastrophic loss, but other sources of funding may also be available. For example, if the president formally declares a disaster, state and local government entities, eligible nonprofits (including hospitals, colleges and universities) and Native American tribes may qualify for federal disaster relief, including Federal Emergency Management Agency (FEMA) Public Assistance Program grants, U.S. Department of Housing and Urban Development Community Development Block Grant Disaster Recovery grants, and Federal Highway Administration disaster grants.

In the case of FEMA Public Assistance grants, the documentation and reporting processes can be onerous, with a multitude of eligibility requirements that address the applicant, facilities, work performed and costs incurred. FEMA also has many insurance requirements, particularly for organizations that have received FEMA funding for previous disasters. Developing an understanding of these and other federal guidelines and implementing necessary procedures and controls before a disaster occurs can help ensure that maximum funding is secured in a timely manner, and can also help withstand audits by federal agencies.

5. Assessing liquidity needs

It is critical to maintain liquidity following a loss event. A careful assessment of the amount and timing of potential recovery from insurance and other sources of funding, consideration of continuing costs and extra expenses to maintain operations, and the need for capital to rebuild operations can shed light on the requirements for cash reserves and access to credit during an extended operational shutdown. While insurers may provide advances following a catastrophe, final settlement often takes longer than expected. Planning in this area can help avoid unexpected cash shortages that put business continuity at risk.

6. Developing a loss response team

Before a loss occurs, it is essential to identify and train the team that will support the organization following a loss event. Internal resources should include a broad spectrum of resources spanning the risk, legal, finance and accounting, operations, sales, engineering, and procurement departments. Additional external resources may include debris removal companies, general contractors, engineers, attorneys, accountants and other consultants. Developing your team and outlining their roles before a loss occurs will help expedite the recovery process, increasing its overall effectiveness and saving costs.

7. Assessing insurance coverage

An organization must conduct a review of its coverage at least annually and even more frequently when faced with significant changes in operations. Often, companies discover too late that their insurance policies do not provide sufficient coverage for property damage, business interruption and extra expenses. Many also discover unclear or ambiguous policy language that creates settlement issues.

An annual policy review should provide an understanding of the risks covered, sublimits, exclusions, deductibles, waiting periods and coinsurance requirements. This process can help ensure that risks are covered in the manner intended by management. Following annual renewals, it is also important to determine if any risks need to be further addressed and mitigated due to changes in coverage that may have occurred during the underwriting and renewal process.

The review should include an assessment of the organization’s covered locations and confirmation that the policy lists (or contains appropriate blanket coverage for) all existing locations, especially recently added ones. It should also include an assessment of the statement of values to determine whether property values are current. Property values may need to be updated as companies add, upgrade or sell equipment, invest in new capital, and change physical structures.

The organization’s business interruption values should also be assessed. This means, at a minimum, assessing each location and operation to determine the organization’s exposure to a loss of net income and expenses that would likely continue following a catastrophic event. As your business grows or declines or margins change, business interruption values will likely change as well. Failing to update these values could result in a gap in coverage due to insufficient policy limits, or potentially trigger a coinsurance penalty if designated in the policy.

In assessing insurance, it is important to pay close attention to sublimits, exclusions, waiting periods and deductibles, all of which can significantly impact an organization’s level of financial recovery. As an example, a large entertainment facility experienced a significant loss when an electrical outage led to the cancellation of a show on a busy weekend. Management was surprised to learn that the loss was not covered due to a 48-hour waiting period for “service interruption.”

The period of indemnity specified in a policy may also have a major impact on recovery. Insurance policies typically define the period of indemnity as beginning on the date of loss and extending through the period during which the property can be repaired, rebuilt or replaced, with reasonable speed, to the condition that existed prior to the loss (or, alternatively, the date business is resumed at a new location). Many policies also provide an “extended period of indemnity” of 30 days or more to give the business additional time to restore normal operations. This extended period can provide critical support for financial recovery.

It is also crucial to understand your needs with regard to employee payroll following a catastrophic loss. Business interruption insurance policies may provide full, limited or no coverage for “ordinary payroll” following a catastrophic loss. Ordinary payroll refers to payroll expenses of employees other than executives, department managers, employees under contract and other employees deemed vital to continuing operations. Companies with a critical need to keep such employees after a loss typically require this type of coverage in their policy.

Coverage for extra expense should also be assessed and considered in light of potential actions following an interruption of operations. This coverage generally addresses expenses incurred during the period of restoration to avoid or minimize the suspension of operations at either the current location or temporary locations.

A variety of special coverages are available to cover other areas of risk and may be appropriate for risks specific to the organization, such as insurance for contingent business interruption (to cover losses sustained by your organization as a result of physical damage occurring at your suppliers’ or customers’ facilities), supply chain disruption and cyber incidents.


Source: Risk Magazine
Author: Allen Melton
Author: Michael Speer


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