THE RHA REVIEW
Volume 1, No. 3, Second Quarter 1995

By Cathy L. Jones, CPCU

What do Baker & McKenzie, Clarence Thomas and the recent movie Disclosure all have in common? If you said sexual harassment, attorneys, and truth and fiction, you are right. Which of the last two is true and which is false will be left to the reader.

The surprising fact is that, according to USA Today, the number of sexual harassment claims in the workplace has increased from 5,603 in 1989 to 14,420 in 1994. It is anticipated that this number will continue to increase as publicity increases for the larger verdicts and as employees become aware that sexual harassment is wrong.

There is an array of employment-related events which an employer can find himself or herself subject to: refusal to hire, failure to promote, wrongful termination, discrimination under a variety of federal acts, and sexual harassment. The good news is that insurance coverage is now available for the majority of those exposures and is being provided by several of the major carriers in the US and London. The coverage can be obtained either as an endorsement to the Directors & Officers liability policy or as a stand-alone coverage called "Employment Practices Liability Insurance," or EPLI. Each policy provides a different degree of protection, depending on the carrier and on whether it is a stand alone product or an endorsement.

Do you need to buy coverage? That answer depends on many factors, including the size of your company and how far removed you are from the day-to-day operations. Do you need to implement risk management of the exposure? Absolutely! Regardless of the size of the company or whether you buy insurance, you need to take control of the atmosphere in which you ask your employees to live. I chose the word "live" on purpose, as most of us spend more time at the office than at any other activity, including sleeping. It is becoming more and more common for the courts to impose the duty of making the workplace livable.

The current term used to describe sexual harassment claims is "hostile environment." A hostile environment can be created by improper sexual advances from one person to another. But a hostile environment can also arise from offensive pictures on a computer screen-saver, or from a calendar or a magazine left lying around. I have even heard of one case in which a female employee overheard another female employee talking to her boyfriend on the telephone during work hours and was offended by the language used. Any of these situations can create a poor environment that must be dealt with as soon as a complaint is made.

In this issue I thought we would look at techniques that can be implemented in an effort to diffuse claims by employees. In coming editions of this newsletter we will look at the types of coverage available and who should consider buying it. In the meantime, use this letter as a checklist for how you or your company is doing.

The term "seer" is described in the Oxford English Dictionary as a person of supposed supernatural insight, a person able to see visions. Hopefully using the acronym SEER will help you see a future of no claims and visions of a workplace where the only conflict is about how the next project is going to be accomplished. To get to that point, Set a policy, Enforce it, make no Exceptions and have a Resolution mechanism in place.

Most businesses have a policy that says that they will not discriminate based on age, sex, ethnicity, religion, etc. Do you have a policy regarding sexual harassment? If not, you should. It should be 1) posted in a prominent place where most employees will see it, 2) given to all new employees when they are hired and, 3) written at a level that can be understood by all employees, regardless of their education. While I do think it is very important that you have your attorney work with you on a policy, you must ensure that it is written in plain language and not legalese. I had a client ask employees to sign a form that was written for a person with an educational level of 13. What we often forget is that news magazines such as Time and Newsweek are written at a ninth-grade level. so make sure your audience can understand your message.

Also be careful what you say. I recently saw a notice in a client’s office that said, "Sexual harassment will not be tolerated. It is financially costly to both the company and the employee." Does it have to be financially costly? Not necessarily, but that has planted the notion that if there is bona fide sexual harassment, the employee will be financially compensated. You don’t want to leave that impression.

As everyone knows, rules are nice, but what is the point of having them if they aren’t enforced? With each passing day it is becoming more evident that every corporation or partnership must have a policy and must enforce it. From the highest level to the lowest level, all employees must know the ground-rules on which they will be judged. I heard a story about a young man recently out of high school who joined a large corporation. Part of his job in the mailroom was to deliver the mail in the company’s offices. He found one secretary particularly attractive and, despite the fact that she was married, repeatedly asked her out for lunch or a drink or a movie. The female complained to a peer and the matter was quickly resolved in a discussion with the young man. The point of the story is that not all sexual harassment claims will come from a superior to a subordinate. Be aware that complaints can come at all levels and be prepared for them.

It has been reported that the jury in the Baker & McKenzie trial assessed punitive damages against the law firm in excess of $7,000,000 because the firm had terminated the offender for improper billing practices. It was shown in court that his file contained many complaints of sexual harassment, yet the firm had done nothing about his conduct. The jury wanted to send a message that repeated instances of sexual harassment should not be tolerated. Keep that in mind when you set your policy and then enforce it.

In Coit Drapery Cleaners, Inc. v. Sequoia Ins. Co. the employer asked for coverage under a general liability policy for a sexual harassment suit brought by a former employee against the president of the company. The California Court held that the general liability policy would not provide coverage for intentional wrongdoing and that California law found such acts uninsurable as a matter of public policy. So if you’re the president or chief operating officer of the company, you should make it known that you support the policy and that you will also abide by it. Then show your support through your actions and your words.

So now that you have a policy that is applicable to everyone in the organization, how are you going to take care of the first incident? How many are you going to tolerate before the employee is terminated? Does the offender know what the consequences will be? Try to set a policy that does not require the accuser to confront the accused. if there are consequences for the improper action, make sure the offender, not the offended, incurs the consequences. In other words, transfer the offender, not the offended, to another department. Try to diffuse the situation as soon as possible. Your actions will be important not only in resolving the situation, but you will also send a message to all of your employees that such conduct will not be tolerated.

Just remember, this is a problem that will not resolve itself and one that can have major consequences for the company that tries to ignore it. I have tried to make the language gender-neutral as I wrote this article because sexual harassment can be perpertrated by both males and females. Demi Moore’s part in Disclosure wasn’t all fiction. Jenny Craig, Inc., is currently being sued by male employees, and cases have already been settled in which males have claimed to be sexually harassed by their female supervisors. Be aware of the environment in which your employees work and help them make it better. Everyone will benefit in the long run.

As I said at the beginning of this article, in later issues we will explore the differences in coverage and the way the coverages are applied. In the meantime, perhaps you have learned a little about setting standards and policies that have helped your organization. If you have any comments or questions, we would love to hear from you. We will be glad to pass on your experiences to our readers in future editions.