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10 Insurance Tips for Risk Managers

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NEW ORLEANS—Most companies will at one time or another face coverage issues and lawsuits. In order to identify and avoid insurance-related issues and disputes before they arise, risk managers should take advantage of proven strategies for resolving difficult claims, advised Darin McMullen, attorney with Anderson Kill, P.C. at the RIMS 2015 Annual Conference & Exhibition here.

1. The purpose of insurance is to insure.

Don’t underestimate potential future problems and think of loss prevention and risk transfer rather than loss financing, he noted. Companies need to assess the types of risks they will face and make sure their program is tailored to meet these needs. Also important, he said, is making sure policies are designed to cover the losses the company will face on a day to day basis. For example, certain types of risks are seen in manufacturing and other risks are particular to an IT vendor. Risk managers need to examine any pitfalls or shortages that may exist in their current policies and seek legal opinions well in advance of renewal. They need to look at how exclusions might be interpreted as well, McMullen said.

Joshua Gold, also an attorney with Anderson Kill, added that risk managers’ jobs are more difficult than ever, with fragmentation in insurance programs existing, since many polices are purchased for a program. These may include directors and officers, product liability and cyber insurance. “There are products out there that try to assimilate them and make sure gaps in coverage are treated,” Gold said, adding that while the fine print in policies can be overwhelming, it can be key for proper coverage, especially when dealing with multiple lines, excess layers and towers of insurance.

2. Don’t limit insurance expertise to the risk management department.

All too often, “there are still going to be thorny claims and there still are going to be disputed claims, which are unavoidable,” McMullen said. He said that building expertise elsewhere within the company is critical to taking advantage of any and all available coverage. “We get the need for everybody to work together, but now, more than ever, this is important,” he said. Coverage should not just be delegated to risk or legal and collaboration is needed. For example, IT departments need to be included when planning for cyber coverage.

3. Lawyers and risk managers can be natural allies.

While there may be friction between departments in a company, legal generally recognizes the beneficial role risk managers play, McMullen said. He added that risk managers need to put any insurance-related communications in writing and assist in the analysis of policies and claims.

4. Insurance is an essential component of corporate resources and asset conservation plans.

Risk managers should purchase coverage with the intent of safeguarding the company’s own property and employees. They also need to recognize which mechanisms actually transfer risk and which do not.

5. Think insurance after a loss occurs.

This means looking to insurance coverage following all lawsuits, claim letters, product-related issues and financial losses. Risk professionals also need to analyze other sources of insurance that could possibly cover a claim.

6. Give notice of a claim or loss as soon as possible.

When faced with a claim or loss, McMullen advised risk managers not to hesitate to notify their broker, insurers and everyone in their tower of insurance as soon as possible.

7. When you make a claim, don’t accept “no” for an answer.

There is no downside to challenging an insurer’s denial of coverage. “You owe it to your company, you owe it to your organization to explore this and push back,” McMullen said, adding that determination and persistence often mean the difference between coverage and no coverage.

8. Find out where your company’s policies are.

Locate, collect and catalogue past insurance policies. Also acquire and keep policies of all entities related to your company.

9. Don’t panic if your insurer becomes insolvent.

If this is the case, McMullen advised risk professionals to file a proof of claim as a creditor and file a claim against the state guaranty fund in one or more possible jurisdictions. He recommended that they request the next layer of insurance companies to “drop down,” and also to consider litigation options.

10. Make sure your insurance team is conflict-free.

This means the team should be untainted–risk managers need to know where loyalty lies and if an attorney is representing both sides, McMullen said. “You want a conflict-free insurance team to take on the insurance company and to fight for the coverage that you are paying for,” he concluded.

 

EEOC Settles its First Transgender Suit Filed Under Title VII

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As we previously reported, the EEOC has decided to pursue protections for transgender workers under Title VII’s prohibition against sex discrimination and harassment as part of its strategic mission, even though no federal statute, including Title VII, explicitly prohibits employment discrimination based on gender identity or expression.

To this end, the EEOC filed two lawsuits on Sept. 25, 2014 on behalf of transgender workers –EEOC v. Lakeland Eye Clinic, P.A. (Middle District of Florida, Tampa Division) and EEOC v. R.G. & G.R. Harris Funeral Homes Inc. (Eastern District of Michigan, Southern Division) — on behalf of transgender workers.

On April 9, Judge Mary S. Scriven of the U.S. District Court for the Middle District of Florida approved a consent decree entered into between the EEOC and Lakeland Eye Clinic, P.A. settling one of the two lawsuits. The terms of the Consent Decree, including the nature of the programmatic relief required by the EEOC make it crystal clear that this is an area that the EEOC will continue to pursue in 2015 and beyond.

Case Background

In EEOC v. Lakeland Eye Clinic P.A., the EEOC claimed that an organization of healthcare professionals fired an employee because she is transgender, because she was transitioning from male to female, and/or because she did not conform to the employer’s gender-based expectations, preferences, or stereotypes. The complaint alleged that even though the claimant had been performing her duties satisfactorily, she was terminated soon after she began presenting as a woman and informed her employer that she was transgender.

Terms of the Consent Decree

The EEOC and Lakeland Eye Clinic, P.A. reached a settlement during the course of discovery. In full and complete settlement of the claims raised by the EEOC, the parties entered into a Consent Decree which Judge Scriven approved on April 9. The following are highlights of the terms of the Consent Decree:

  • Total payment of $150,000 to the aggrieved employee as well as a neutral letter of reference
  • Revised employer discrimination and harassment policies stating that no employee will be terminated (or harassed) “based on an employee’s status as transgender, because of an employee’s transition from one gender to another, and/or because the employee does not conform to the Defendant’s sex or gender-based preferences, expectations or stereotypes”
  • Managerial and employee training including “an explanation of the prohibition against transgender/gender stereotype discrimination under Title VII” and “guidance on handling transgender/gender-stereotype complaints made by applicants, employees and customers.”
  • Monthly reports to the EEOC every six months certifying compliance with the terms of the Consent Decree
  • Two years of monitoring by the EEOC, including the right to conduct workplace inspections with 24 hours’ notice

Implications for Employers

The theories of liability articulated by the EEOC in this case closely follow the EEOC’s prior landmark administrative ruling titled Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 23, 2012) (previously discussed here) in which it held that transgender individuals may state a claim for sex discrimination under Title VII.

We expect that EEOC-initiated ligation on behalf of transgendered individuals will continue to increase given the Commission’s enforcement strategy and desire to “push the envelope” in this area. As we previously advised, employers must be mindful of issues related to gender identity and/or expression that might arise during interviewing, hiring, discipline, promotion and termination decisions. Employers should be particularly vigilant when an employee identifies as transgender, or announces a plan to undergo a gender transition. Stay tuned!

This blog was previously posted on the Seyfarth Shaw website here.

EEOC Issues $245 million Probable Cause Determination against NYC

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On April 1, the EEOC’s New York District Office issued a Determination finding probable cause to believe that the City of New York’s Department of Citywide Administrative Services (DCAS) violated Title VII and the Equal Pay Act based on its “pattern of wage suppression and subjective promotion based on…sex, race, and national origin.” In the accompanying conciliation agreement proposal, the EEOC demanded numerous forms of programmatic relief from DCAS (e.g., EEOC monitoring and notice postings) as well as back pay, future pay, compensatory damages and legal fees and costs totaling more than $246 million. For any employer, the EEOC’s position is one that ought to be heeded for “lessons learned….”

The Charge

The Communications Workers of America, AFL-CIO Local 1180 filed a charge of discrimination with the EEOC against DCAS in 2014 on behalf of a class of African-American and Hispanic women who were (or still are) employed as administrative managers in various NYC agencies. The Union asserted that a discriminatory pattern of wage suppression on the basis of sex, race and national origin exists as well as facially neutral policies governing assignment, promotion and wages that have a disparate impact on female African-American and Hispanic administrative managers. To this end, the Union alleged that the minimum salary for administrative managers—which is disproportionately paid to Hispanic and African-American women—has been frozen for many years whereas the maximum salary for administrative managers (positions held primarily by Caucasian males) has increased significantly.

In addition to arguing that the Union did not have standing to file a charge with the EEOC, DCAS denied the allegations of discrimination and provided “a small sample of administrative managers along with their gender, race, agency, salary, and description of their job duties in an attempt to demonstrate that administrative managers do not perform equal work.”

EEOC’s Determination and Proposed Conciliation Agreement

The EEOC agreed with the Union, opening that DCAS’ evidence “was insufficient” and did “not withstand scrutiny.” The EEOC also alleged that DCAS declined to provide certain requested information and “the Commission determines that the silence is an admission of the allegations in the charge, and exercises its discretion to draw an adverse inference with respect to the allegations.”

In addition to its Determination, the EEOC provided a proposed Conciliation Agreement to resolve the charge against DCAS. The Conciliation Agreement, were DCAS to accept it, would require DCAS to, at a minimum, award raises via “an annual step process;” increase the minimum salary for all administrative managers; and agree to “proper oversight, opportunity and enforcement of equal employment,” which would include the appointment of an EEO monitor; amended job descriptions with a revised posting and bidding process; and provision of tuition assistance to union members to “level the playing field” for union members so that they can “effectively compete with their white male colleagues in the workplace.”

With respect to monetary damages the EEOC demanded $188,682,531.00 in back pay, a new starting salary for administrative managers of no less than $92,117.00, $56,922,000.00 in compensatory damages under Title VII, and no less than $1,000,000.00 in legal fees and costs.

The EEOC gave DCAS until April 17, 2015 to provide a written counter-proposal or advise if it did not wish to engage in conciliation. Absent what it deems a “reasonable written counter-proposal” from DCAS, the EEOC warned that it may deem conciliation futile and fail conciliation.

Implications or Employers

The headline grabbing dollar amount requested by the EEOC in this proposed conciliation agreement is certainly staggering and catapults this case into the “one to watch” column. Furthermore, this confirms what we predicted in our EEOC-Initiated Litigation Report – that the EEOC is going to focus this year on recovering large settlements and verdicts to try to make up for low recoveries in fiscal year 2014. As DCAS has already publically stated that it intends on participating in the conciliation process, we will be sure to monitor developments. Stay tuned!

This post can also be found on the EEOC Countdown blog here.

 

Legal Lessons from Starbucks’ Race Together Campaign

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Starbucks Coffee Race Together Campaign

One aspect of Starbucks Coffee’s recent “Race Together” campaign encouraged employees to engage customers in a discussion about race. This effort—which had employees write #racetogether on customers’ cups to encourage dialogue—was well intentioned. However, the speed at which it was scrapped shows just how difficult it is to incorporate political and social discussions into the workplace.

The term “hostile work environment” often gets thrown around without any thought to what that really means. The greatest misconception is that anything hostile or abusive that happens at the workplace is illegal. Albeit inappropriate, screaming at an employee or calling him stupid is simply not illegal.

The flipside of that coin is that conduct does not necessarily have to be abusive or threatening to create a hostile environment when the subject matter is a protected category under Title VII, which prohibits discrimination by covered employers on the basis of race, color, religion, sex or national origin. Forcing employees to engage in discussions with strangers about race without any control over how the customer will respond opens an opportunity for the work environment to become incredibly uncomfortable for employees.

Employers have a duty to protect their employees from harassment based upon protected categories by customers, not just other employees. So if a customer responds to an offer to start a conversation about race with a mean-spirited joke or simply a racial epithet, the employer will have to take action against that customer. If these types of responses become repetitive, the employer would likely have an obligation to stop the source of the conflict—in other words, cease the practice of having employees start discussions about race.

There are many other pitfalls in having workplace discussions around sensitive topics that fall into protected categories under Title VII. A discussion of this sort, in spite of the best intentions of the participants to be thoughtful and candid, can easily bring to the surface differences in thought among employees, which may result in ill will. Likewise, comments made during these conversations could be used as evidence that a particular manager is prejudiced against certain types of individuals. Individuals certainly have different perceptions of the meanings of different comments and actions, so a manager might feel that comments he makes do not show any sort of prejudice, while the people hearing the conversation can come to a completely different conclusion. Should the manager then take some disciplinary or other job-related action against an employee, the conversation may be used as the basis for a discrimination lawsuit. At that point, what the speaker intended is less relevant than how the comment is perceived by a judge or jury.

Most employers today certainly haven’t taken steps to instigate this sort of discussion in the workplace. But events do arise in the news that relate to these topics and become the fodder for water cooler conversation. Most employers do not want to become the “speech police,” monitoring every communication among employees that might not relate directly to the business. Yet, these conversations can, just as the discussion on race that Starbucks initiated, become problematic. Then, the key is to make sure that employees are aware of their opportunities to report behavior that causes them discomfort. Open door and non-harassment policies attempt to encourage employees to come forward well before any workplace conduct would become a truly actionable illegal hostile environment. Encouraging use of this process can assist employers in nipping problems in the bud.

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Handling a complaint related to an uncomfortable discussion can have its own problems. Chances are that the employee being complained of did not understand that talking about what he saw on the news the night before should be grounds for his being called out. Many employees wrongly believe that the First Amendment protects the right to discuss these events at a private employer’s place of work.

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Thus, when having the conversation with the offending employee, the employer needs to be prepared to educate the employee on the differences of opinions and perceptions that different people have as well as the employer’s right to keep discussions out of the workplace.

While the conversation about the Starbucks “Race Together” campaign will likely die down, employers can continue to expect the occasional need to address misunderstandings and comments as long as the outside world is focused on these issues. In light of that, here are some steps employers can take to be prepared.

  • Train managers that they should not be engaging in conversations on non-work-related controversial topics with their employees.
  • Train employees and managers in the reporting procedures under open-door policies so they know how to raise a problem before it becomes a big issue.
  • Train employees that your nondiscrimination and harassment policy extends not just to their fellow employees, but also to customers and vendors.

Finally, and most importantly, be responsive when employees raise concerns. Not every complaint is a valid one and not every event that makes somebody uncomfortable is inappropriate. Sometimes an employee must be told that their complaint is not going to result in any changes. Failing to follow up with the complaining employee creates an atmosphere of distrust or leads to the belief that the employer does not mean what it says about preventing illegal harassment.

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