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Employment Practices Liability in 2002 Escalating Exposures

Employment Practices Liability in 2002 Escalating Exposures. Who is in the gun sights of the Plaintiff’s bar?. Overview. Evolution of coverage and climate since 1992 Class action complaints continue to rise Plaintiff’s bar experiment with new extortion tactics

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Employment Practices Liability in 2002 Escalating Exposures

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  1. Employment Practices Liability in 2002Escalating Exposures Who is in the gun sights of the Plaintiff’s bar?

  2. Overview • Evolution of coverage and climate since 1992 • Class action complaints continue to rise • Plaintiff’s bar experiment with new extortion tactics • EEOC & OFCCP continue aggressive stance • Layoffs are at a record pace • EPLI insurers must react

  3. Evolution of EPLI Coverage • 1992 stand alone EPLI coverage created • On year earlier Congress amended Title VII: impacts • Contrast in plaintiff bar stance on EPL in 2002 vs 1992 • What have these changes meant for Employers Loss experience in the employment arena?

  4. What Is the Basis of the Discrimination? • Majority of our class action complaints allege discrimination based on race • Next category is gender • Age discrimination allegations are common in outsourcing and downsizing claims

  5. What Is Alleged? • A pattern & practice of discrimination in: • Hiring • Wrongful terminations • Glass ceiling or promotions • Job assignments • Training opportunities • Compensation or pay

  6. Who Are Some of the Key Players in the Plaintiffs Bar? • Saperstein Goldstein Demchak & Baller • Mehri & Skalet • Gordon, Silberman, Wiggins & Childs • Leiff Cabraser Heimann & Bernstein • Sprenger & Lang • Johnnie Cochran • Leeds, Morelli & Brown • Willie Gary

  7. Emerging or Current Tactics • Class action cases • Traditional high profile litigation seeking settlements for big dollars > Saperstein, Gordon Silberman, Sprenger & Lang • Social reform • Litigation trend against high profile defendants to set an example and change behavior > Cyrus Mehri • Multiple Claimant or Mass actions • Group based litigation > Leeds, Morelli & Willie Gary

  8. Emerging or Current Tactics • Multiple claimant or mass actions • Represent a group of 30 - 100 claimants all in the same protected class • They have various discrimination impacts • Threaten high publicity litigation on a class or individual basis • Offer to settle out with the group via a negotiated process to air each individual’s complaints • Offer to make a positive statement about the employer

  9. How Do the Employers React? • Class actions — we will fight, we don’t discriminate, ultimately most settle • Social Reform — Cyrus Mehri does his homework. Most will settle for big dollars and will enact ongoing training, monitoring and oversight • Mass actions — Most opt to settle under the heat of the negative publicity

  10. What Is New at the EEOC? • New EEOC Chairperson Cari M. Dominguez • Pulling back litigation authority from their field offices — Litigation as last line of defense • More mediation, settlement and conciliation with employers as opposed to litigation • Still aggressively pursuing discrimination in the workplace, but focused on prevention • OFCCP audits aggressively target compensation issues

  11. Current Economic Impacts • Significant merger & acquisition activity, which often results in layoffs • Expense driven downsizing and outsourcing • Displaced workers looking for evidence of adverse discriminatory impacts • We expect a possible surge in age and race discrimination claims

  12. New Evidence of Increased EPL Case Costs • 1/23/02 Press release regarding Jury Verdict Research Study for 2000 cases • 44% increase over 1999 for median awards in EPL cases • $218,000 median for discrimination and retaliation claims • 7 year (1994-2000) Median by type: • Sex: $100,000 Race: $120,951 • Disability: $175,001 Age: $268,928 • Plaintiff recovery rates: All EPL: 67% • Race Discrimination: 62% Sex Discrimination: 69%

  13. What Has Carrier’s Experience Been? • Unfavorable accident year trend • What is driving losses: • Size: Large employers are huge targets • Location: CA, MA, NY, NJ, GA, FL, MI, southern TX. Coasts and cities are tougher • Industry: Retail, technology, telecom, transportation • Significant new trend: image conscious or publicly traded

  14. How do Underwriters Respond? • More intensive underwriting: • Are our Insured’s prepared to defend themselves? • Do they regularly assess and track their diversity trends? • Do they review diversity trends in hiring, promotions, compensation, job assignments, training opportunities and terminations? • Are they a Federal contractor? Have they had any OFCCP audits lately? What have the results been? Can we review their required affirmative action plans? • Does their size or public image attract the plaintiff’s bar?

  15. How do Underwriter’s Respond? • For large and image sensitive clients we need to address the following issues: • Require experienced class action or mass action defense counsel • Greater Insured participation in losses via significant class or mass action deductibles and co-participation in losses via significant co-insurance • The mass action deductible actually provides more certainty to the Insured as opposed to current policies • Remedy inadequate pricing via rate increases

  16. What Other Creative Solutions Can be considered? • Finite risk deals for the primary or burn layer exposure • Captive Insurance to fund for large self insured retentions • Quota share line slip approaches to spread the carriers exposure up out of the primary or burn layer

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