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Employment Practices Liability Insurance

February, 2000. This is an update to a previous posting concerning a presentation made at the November, 1997, Houston RIMS Chapter meeting. Mr. Bob Ivey, an attorney with the Employment Law practice of Vinson & Elkins, made the presentation. The centerpiece of his talk was a review a $26.6 million sexual harassment judgement against Miller Beer, popularly referred to as the "Seinfeld Case."

At work one day, a Miller Beer manager replayed the previous night's episode of Seinfeld to his coworkers. In the episode Jerry Seinfeld could not remember his date's name — only that it rhymed with a female body part. This backfired on him when she figured out what word he had used to help his failed memory.

A Miller Beer female coworker joined the group. Uncomfortable about repeating the word of the female body part out loud, her male coworker opened a dictionary and pointed it out to her.

She filed a sex harassment claim. He was fired.

He sued Miller Beer and her — and won $26.6 million in a jury trial. According to a published report in the New York Times (February 24, 2000), this award was reversed on appeal.

Bob Ivey's presentation more than two years before the reversal pointed to the weaknesses in the plaintiff's case. More important, Bob Ivey's list of useful "Do’s and Don’ts" are still relevant today.

 

Top Ten List of Employment Laws

  1. Don't compromise "at will status" in your agreements with employees
  2. Do promptly investigate these incidents
  3. Don't prejudge the outcome of the event
  4. Do take remedial action
  5. Do make the punishment fit the crime
  6. Don't defame the offending employee
  7. Do inform your employees of the full ramifications of any changes in pay, salary level, etc.
  8. Don't forget to document performance problems
  9. Don't cite the specific reason for firing someone; rather, say words to the effect, "We've lost confidence in your ability to manage the department."
  10. Don't give him/her a big severance check without getting a release

 

 

As a part of every Diagnostic Insurance Review Montclair Risk Advisors assesses the organization’s need for Employment Practices Liability insurance ("EPLI"). EPLI is available now to small businesses through their business owners insurance policies. Larger organizations are going to have to purchase a separate policy. The coverage is often combined with Directors & Officers Liability insurance.

For organizations that already have EPLI insurance, we compare the present policy to the latest forms available. A good deal of refinement in the coverage has taken place – and you do not want to be stuck with outdated coverage. While the purchase of EPLI has become widespread, risk managers must still be diligent in the elimination of business practices that permit EPLI incidents to occur. Deductibles for most large businesses are $25,000 or more – and the investigative and legal defense expenses can add up quickly, even if the claim is dropped by the employee.