Legal exposures for business clients can go largely unnoticed until it is too late, placing brokers on the hot seat for driving home the message that E&O and D&O policies may not be enough.
Donna Cassidy, director and EPL assistant product manager for
Chubb Specialty Insurance,
Chubb Insurance Company of Canada, has seen first-hand as an underwriter that many clients simply aren’t aware of the cracks in coverage.
“A big part of my job is to work closely with brokers to ensure that the clients are aware of any shortcomings in coverage,” says Cassidy. “We are here to assist in any way we can. We have developed sales tools to assist brokers and clients in having these types of conversations.”
Cassidy says that Chubb has invested a considerable amount of time and money into developing these sales tools, but it is really the loss scenarios that help brokers in their discussions with their clients.
“When you can sit down with the commercial client and show them how many ways they are exposed,” she told
Insurance Business, “any client can see how the same thing can happen to them at their company, especially when you are talking about discrimination or harassment cases.”
From the claims’ perspective, Laila Brabander vice president, Canadian zone, third-party claims manager at Chubb, points out that many clients who find themselves on the wrong end of a claim aren’t aware of what coverage is included in a general liability policy.
“There is certainly a misconception of the employment coverage,” says Brabander. “And I believe that stems from the fact that generally speaking, under Canadian employment law, the contractual relationship is between the organization (the corporation as employer) and the employee. So a lot of times there is a perception under the GL policy that the corporation has coverage; or under a D&O policy that having coverage just for the directors and officers is adequate. But that is a misnomer.”
Many companies don’t consider the “what ifs,” says Cassidy, but they are able to appreciate the scenarios when shown examples.
“One thing that we talked extensively about in a recent seminar, is how quickly the law has evolved,” says Cassidy. “Especially for this particular area of the law, where there is both a statutory and common law component. It is difficult to imagine how any employer, particularly a smaller company with limited resources, can be expected to stay abreast of these changes.”
It is the smaller business and not-for-profit organization clients that struggle to keep up with the changes in employment law.
“I am sometimes shocked when I look at the statutes, and I wonder how they expect employers to be able to implement what is necessary to comply for everyone in such a short period of time,” says Cassidy. “That is really the benefit of Chubb, in that we are so focused on this line of coverage; we are constantly reviewing our policy language to make sure we’re up to date, and obviously we are in communication with our claims department, and we are also in close communication with our brokers, and are sharing that information with them.”
Having this wealth of information and expertise close at hand is wonderful for Cassidy, but she does understand the challenges posed to brokers who have to become experts on what is a very involved line of insurance.
“I can certainly appreciate the challenges brokers face in being well versed in all insurance coverages; I’ve only ever specialized on the executive protection lines of business,” she says, “and just that area is very involved. So to expect all brokers to be experts in everything is a lot to ask. We have that added value of expertise that we can offer the broker.”
From Brabander’s perspective on the claims side, brokers may wish to take a broad approach to coverage for a company, because “a holistic review of the coverage that’s currently afforded assists in ensuring that there are no gaps in potential coverage for either the organization or any insured persons who may be named in a lawsuit.” She notes that the latter are often named as defendants because terminations of employment, or other employment related matters, are very personal affronts and those affronted employees may well wish to name the HR representatives, managers and the corporations’ Directors and Officers in a lawsuit. ”
While you cannot avoid claims altogether, brokers can share with clients where the majority of those claims are coming from.
“It is difficult to nip employment claims in the bud – as that is more of a risk management sort of question,” says Brabander. “But from a Canadian claims perspective, the largest exposure is wrongful termination claims which underscore the manner in which the termination is conducted and the corresponding failure to provide the proper amount of common-law notice when an employee is terminated without cause.”
Running a close second in Canada is anti-discrimination suits, says Brabander; whereas in the U.S., anti-discrimination claims (EEOC charges) are the most common employment claims.
The United States Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee on the basis of race, religion, sex, national origin, age or genetic information.
Brabander says that Chubb’s international perspective provides a wide range of expertise when it comes to claims.
“We have the claims history to help back us up. We have a lot of experience and we partner with law firms in each jurisdiction that specialize in employment law. We don’t take a ‘one-size fits all’ model to litigation. The insured will be provided defence counsel l that is an expert in not only that jurisdiction, but that particular area of employment law.”
Claims examples:
Breach of Contract
Coverage Section: Employment Practices Liability
Claim: Breach of Contract
Company: Privately Held
Number of Employees: Approximately 100
Annual Revenue: Approximately $30,000,000
Location of Loss: Canada
A manager at a manufacturing company was put on leave and subsequently dismissed due to suspicion of using funds for non-business related expenses. The manager alleged that the accusation was false and actually a result of his recent divorce with the owner’s relative. After attempted negotiations, the employee sued the company alleging wrongful dismissal.
$120,000 in defence costs was paid.
Wrongful Dismissal & Discrimination
Coverage Section: Employment Practices Liability
Claim: Wrongful Dismissal & Discrimination
Company: Privately Held
Number of Employees: Approximately 280
Annual Revenue: Approximately $50,000,000
Location of Loss: Canada
An employee of ABC Company alleged that she was wrongfully dismissed. The employee asserted she was terminated without cause or reasonable notice. Subsequent to this, the terminated employee sought damages pursuant to the Ontario Human Rights Code, claiming age discrimination as the reason for her termination.
Pursuant to these actions, $25,000 was paid in defence costs and $58,000 in indemnity.
