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By MARLA DONOVAN, vice president of product development at managing general agent Burns & Wilcox, in Farmington Hills, Mich.

Not long ago, CNN ran a story about a New Jersey grandmother who had shattered all records at the craps table at the Borgata casino in Atlantic City. It was a fun, human interest-type story ? which we all like to see nowadays.

The double entendre is clear and ... funny? Well, that is open to interpretation almost 40 years later. Indeed, the viewer was returned quickly to 2009, as the two CNN commentators--one male, one female--had a bit of "lighthearted sparring" as they remarked on the clip. What was unquestionably acceptable then is definitely not now. This story was a clear reminder of how our society has changed so much during the last half century--change that was unprecedented, and that continues in our time.

While the Bond story may not occur today, sexual harassment?and employee accusations of sexual harassment--in the workplace still does, and employers must protect themselves from lawsuits pertaining to these actions.

Many institutions in both the public and private sectors have taken steps during the past couple of decades to promote a workplace that is free of sexual harassment. These efforts represent a variety of actions--from staff training to policy change to outright cultural change. Many entities have changed by learning the hard way: from costly litigation resulting from an employee who believes he or she was sexually harassed.

Employer awareness of the importance of fostering a nonhostile work environment is at an all-time high. We've come a long way since the Clarence Thomas/Anita Hill hearings in 1991, the defining event which brought the issue of workplace harassment front and center to the American people.

Employment practices liability insurance (EPLI)--a coverage that barely existed 20 years ago--is now considered an important component of good risk management practice.

Even employers whose businesses are free of hostility and sexual harassment can fall victim to today's recessionary climate. As more employees lose their jobs, more employers risk exposure to charges of incorrect or illegal "employment practices," by people seeking financial retribution.

Recently laid-off employees may claim past wage discrimination due to gender, race or religion. But so, too, might current employees--especially in light of the Lilly Ledbetter Fair Pay Act of 2009, signed into law by President Barack Obama.

A further dimension is the fact that now, more than ever, we will see more claims arising due to alleged age discrimination and from a previously unlikely source: the established, male, white-collar employee, who now finds himself jobless, minus his exempt-level income.

No longer will these claims mostly arise from the lower ranks and hence less-compensated employee population. The frequency and the severity of these claims will continue to rise. Some recent examples of claims making their way through the court system capture the essence of the rapidly evolving nature of the exposure:

A 66-year-old secretary with the city of North Lauderdale, Fla., was awarded $75,000 in damages by a Broward County jury in March 2009. Photos of the weeping grandmother--facing the prospect of being homeless and without a car--were run on television for mass consumption

A complaint was filed in February 2009 with the California Department of Fair Employment and Housing on behalf of 440 employees laid off by the Lawrence Livermore National Laboratory in May 2009. This group included scientists, engineers, financial analysts and facilities technicians, and 94 percent were over the age of 40.

A former manager at Google--now 58 years old--filed suit in 2004, claiming age discrimination. The plaintiff claimed that younger Google staffers routinely referred to him as "old man." His attorneys contend that he never received a negative performance review, and that his firing was related to the company's 2004 initial public offering. The case has been making its way through the California court system and is now on its way to the California Supreme Court, which will soon be hearing arguments from both sides.

It is worth noting that all of these cases began before the January signing of the Lilly Ledbetter law.

From 1998 to 2008, age discrimination complaints filed with the U.S. Equal Employment Opportunity Commission rose by 21 percent, according to its Web site. In May, the EEOC reported a staggering 200 percent increase in filed claims in the first quarter of 2009 over 2008.

This is in major part due to the tremendous economic hardships being felt by so many, whether directly caused by their employment situation or not. Direct cause and effect need not be present.

As recently noted by Lloyd's CEO, Richard Ward, we are "now in a blame culture that, in this current financial environment, may spiral out of control."

Prudent risk management demands that every employer--whether in the public, private or nonprofit sector--thoroughly review their current employment practices. Along with this review should be an analysis of the adequacy of insurance coverage.

The good news is that the insurance marketplace offers many options, provided by multiple carriers. Coverage can be obtained on both an admitted and a nonadmitted basis, depending on the class of business, state of domicile and carrier.

We are also seeing more companies offering EPLI on a sublimit basis as part of a Miscellaneous E&O policy. In the standard marketplace, carriers are offering sublimits of $25,000 to $250,000 as part of a package policy. Coverage can vary widely from carrier to carrier, so it is important to analyze each quote carefully.

We have seen carriers broaden their coverage offerings, which is a positive for the insurance buyer. For example, third-party coverage--claims brought by nonemployees--has become available in the last couple of years. And thanks in large part to the ongoing soft insurance market, the pricing remains fairly reasonable. Every employer must consider buying an EPLI policy in order to have defense coverage--that alone could well be the difference between surviving and not in today's increasingly litigious world.

October 15, 2009

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