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By CYRIL TUOHY, managing editor of Risk & Insurance®

Employment practices liability insurance (EPLI) rates are expected to increase by an average of about 5 percent next year compared with 2009, as insurance underwriters process claims stemming from passage of the Lilly Ledbetter Fair Pay Act in January, an EPLI expert said Wednesday.

"Overall, the market is relatively soft, but in 2010, as many of the claims filed in the recession and the claims settle and hit the underwriters' books, we think rates will be up 5 percent," said Adeola Adele, leader of employment practices liability at insurance broker Marsh.

Helping moderate any price increases in EPLI coverage is the more than $750 million in capacity provided by Bermuda insurance markets, along with the entry of Liberty Mutual, CNA and OneBeacon, said Adele

The "abundance of capacity" is another reason insureds and their brokers are having more success in negotiating coverage enhancements and keeping prices from spiking, Adele said.

Adele, who was joined by three other employment liability risk experts, spoke during a Marsh-sponsored webcast for clients on Wednesday.

Other experts included Elizabeth Grossman, a regional attorney with the New York office of the Equal Employment Opportunity Commission (EEOC); Brian Levine, a principal in Mercer's human capital business; and Paul Siegel, a lawyer with the national workplace law firm of Jackson Lewis LLP.

LILLY'S EFFECT

President Obama signed the Ledbetter Fair Pay Act into law on Jan. 29, and some employment liability experts believed the law would lead to an increase in the number of claims filed against employers.

In addition to the new law, major corporate bankruptcies last spring were putting even more pressure on workers to file discrimination complaints, leading some underwriters to fear EPLI rates would be headed for increases of between 5 percent and 25 percent, said Adele.

The nation's biggest companies, which typically shed the largest number of jobs when times are tough, are at highest risk of being on the receiving end of pay discrimination claims.

In retrospect, it appears that, for now at least, fears of double-digit price increases may have been overblown. The EEOC, however, is still on track to record the highest number of pay discrimination complaints ever, according to Grossman.

She said she expected an increase in the number of discrimination and retaliation claims filed in 2009 by employees against employers or former employers. In 2008, there were 95,402 such claims filed with the EEOC, a record, according to a June article co-authored by Levine and Michael Burniston, also a leader in Mercer's human capital business.

Grossman also noted a "number of troubling issues surrounding company policies" taking a harder line against workers--workers with previous convictions, arrests and credit issues, for example.

As a result, "age and retaliation claims are likely to increase," she said.

ERA OF DISPUTE

Siegel agreed that management-labor relations appeared to be headed into "an era of dispute," in part because of the departure of thousands of corporate middle managers with the institutional knowledge of how best to soften the blows of displaced workers.

Small salary adjustments, for example, which amount to fractions of a percent in the overall payroll budget, can go a long way to managing the risk of retaliation and warding off a potential pay discrimination claim, said Levine.

In any case, the experts advised, company risk and benefits managers should review employment policies and make sure they are covered with adequate EPLI coverage, particularly as price stability continues into next year.

For who knows how long that will last? Judging from the experts, the pressure on EPLI rates is starting to build, and there are no guarantees EPLI prices will stay stable for too much longer.

October 22, 2009

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