Harassment and discrimination claims are no longer a rarity in the insurance industry. Claimants and their attorneys have learned that the mere allegation of malfeasance can result in large payouts. Attorney billing rates are astronomical, resulting in insurance companies settling claims to avoid the very large attorney fees that will inevitably be owed at the end of a legal battle. Most of this is due to Fee Shifting Laws that allow plaintiffs who prevail in their law suit to recover their attorneys’ fees in addition to any damages awarded. An award of a single dollar can result in a “win” (for the plaintiff’s attorney at least). This type of “pity” award can lead to defendant businesses paying hundreds of thousands of dollars of attorney fees consisting of both their defense attorneys’ fees and more importantly, the relatively uncontrolled plaintiff attorneys’ fees.
There are many arguments for and against Fee Shifting statutes but regardless, they are a reality in today’s society that every risk manager should understand. Proper risk control is a must to reduce the risk of a claim and to mitigate costs of a claim when filed. Below are several steps every risk management professional should take to reduce the risk of loss:
- Ensure a comprehensive and vetted employee handbook is in place and is reviewed with every company employee.
- Ensure regular harassment and discrimination training is provided to employees on an annual basis, tailored for both supervisors and regular employees.
- Create a clear and unequivocal zero-tolerance culture with regards to inappropriate behavior.
- Provide a known procedure for reporting complaints including an employee hotline and impartial and noninvolved parties to accept complaints.
- Create an impartial and comprehensive investigative process for investigating and documenting complaints or incidents.
- Most importantly, ensure a comprehensive insurance program is in place to provide coverage for possible claims. Limits and deductibles should be suitable for the business and risk.
Risk Manager’s Takeaway:
Remember, a lawsuit can be filed by anyone for any reason but developing a robust risk management program will reduce the frequency and severity of employment related claims, including those of harassment, discrimination, retaliation and hostile workplace. Call the experts at Star Risk Consultants and we will be happy to review your risk management program with you and create a plan that will protect your firm.
