Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, September 4, 1994 TAG: 9410190012
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: JOHN LEVIN
DATELINE: LENGTH: Medium
"Everybody is scared to death of sexual harassment claims," said Bayard Harris, a lawyer at the Center for Employment Law in Roanoke County. His firm, which generally represents employers, last month issued a client newsletter about a Virginia Supreme Court ruling that has added claims for emotional distress to injuries for which a employee can seek benefits under the Virginia Workers Compensation Act.
The case dealt with complaints by Helene Lichtman, who worked for United Services Automobile Association in Norfolk. She claimed that in 1991, she was a victim of "systematic harassment" by two fellow employees, one male and one female. The Norfolk Circuit Court ruled that she could not collect workers compensation payments for her psychological and psychiatric injury because it didn't meet the state law's definition of a specific injury resulting from an accident.
The state Supreme Court overturned that decision June 10.
Combined with rulings that added such injuries and emotional distress claims to actions barred under the federal Civil Rights Act, "everybody in the employment field has feared being hit by federal and state claims," Harris said.
It is not surprising, therefore, that the insurance industry has responded by offering coverage against such charges. But it's an area so new that there are few standards about policies or premiums among insurance companies offering the protection.
"Many [customers] are interested, but few want to pay the price," said J. Randolph Garrett III, senior vice president at Chaney, Thomas, Stephenson & Hill Inc., a Roanoke insurance broker.
Unlike homeowner insurance, which is standardized into just a few types of coverage with clear indications of how liability is rated and priced, employment-practices liability insurance is too new to specify who can buy coverage, for what sort of liability and how much it will cost.
Christine Jones, an account executive at Chaney, Thomas, said $60 to $100 per employee is the range for annual premiums. Generally, large companies pay more than small firms for protection against claims of wrongful dismissal or violations of laws protecting workers with disabilities, those who are pregnant and those covered by the Family and Medical Leave Act of 1993.
But among those charges, sexual harassment clearly is the most volatile and is creating the greatest risk.
Indeed, insurers won't sell liability coverage to companies unless they're virtually risk-free, Jones noted. To write such insurance, she must certify that the company has a policy for dealing with sexual harassment claims, details the policy in employee handbooks, conducts exit interviews with departing workers and permits such issues to arise in the course of annual appraisals.
One Roanoke area transportation company recently was turned down for coverage because it had no such policy and practices and no employee handbook, she said. The outfit is now applying to Lloyd's of London for protection against legal fees to defend itself.
Also, the insurance carriers have lists of types of companies they've targeted as likely customers for the liability coverage and other lists of those they refuse to insure. Among the favored are manufacturers, insurance, real estate and accounting firms, hotels, food processors and textile and apparel companies. On the blacklist are government agencies, contractors, hospitals and nursing homes, airlines, law firms and advertising agencies, Chaney, Thomas said.
Companies with large numbers of highly paid workers and people who earn commissions are considered too risky, Jones said. That's because losing a job would be so costly that claims and potential settlements are pricey.
Garrett predicts the availability and price of the liability insurance eventually will settle into some standards. "Companies writing the coverage will lower rates if they make money. If they lose money, they'll quit the coverage altogether."
Meanwhile, companies facing such claims are attempting to keep them out of court. "Where we've seen liability, we've tried to settle," Harris said. "When a case goes to a jury, it can be very expensive. If a jury gets hold of claims of personal contact, the jury will hit the employer hard," he said.
"There's a terrible fear of these cases," Harris said. "Either the facts are outrageous if they're not true, or terrible if they're true.
"And many business people are aware that you can't stop someone from suing for six figures, even if the claims are unfounded."
by CNB