D&O coverage for a publicly traded company? Certainly makes sense. Fidelity Bond (crime) insurance for a financial institution? Ditto. Professional Liability for a law firm? No doubt. And cyber insurance, for just about all types of organizations? Hard to argue. These are just a few examples of unique risks and exposures, and the corresponding specialty insurance products that go hand-in-hand with them. Many of these have been available for a long time. Some continue to emerge.
But these are not the only ones, of course. There are others that, as you read all the headlines and contemplate all the evolving exposures in today’s society, you can easily say to yourself: “If I am not managing this risk through mitigation efforts and risk transfer, I might want to reconsider.” For me, employment practices liability insurance (EPL) hits this mark. While long available, EPL has tended to be an optional purchase in certain cases, as opposed to a must-have risk transfer solution.
Longer lives could mean longer careers
The recent headline of a large accounting firm facing class-action litigation by older job applicants (in violation of the Age Discrimination in Employment Act (ADEA) is only part of the story, albeit a big one. It is way too early to know where this specific case will go, but we may see some clarity on this issue when the Supreme Court rules on a similar case brought against R.J. Reynolds Tobacco Co., (Villarreal v. R.J. Reynolds Tobacco Co., 839 F.3d 958 (11th Cir. 2016). Regardless of the outcome, it’s hard not to see potential exposure growing in this area from a mile away. Statistics continue to show that a significant percentage of the workforce will move into retirement age over the next 20 years. Meanwhile, the heavily scrutinized millennial generation continues to populate the working world, including those coming straight out of college and graduate school. But just maybe, there are some significant assumptions being made here that could go awry.
Who can say for sure that people headed toward retirement age will indeed retire and not contemplate open jobs at companies typically earmarked for new college graduates? Healthier living and improving healthcare technologies are leading to longer lives and the appeal of retiring at age 55, or 62, or 65 also implies the real possibility of a 35-40 year post-retirement life to live. That’s a long time to live on a fixed income. Add to that calculation the fact that many white-collar jobs don’t have intense physical requirements (unlike police officers, firefighters, manual laborers, etc.) and the hiring manager may well see a clash between that 35-year industry veteran and a post-graduate millennial. Employers may be caught in the middle of that competition. Are allegations of discrimination based on age, whether meritorious or not, really that far-fetched in these situations? We will see.
In the face of this, alongside all the other potential allegations that can be made against employers, any decision to not buy EPL insurance needs another look. The coverage is available, relatively mature (many claims have been adjusted and paid over the course of 25+ years) and comes with built-in risk management features. With insurance buyers having secured significant premium savings in a stable and soft insurance market, it may be time to repurpose those savings of the last few years and invest in protection against a clear and ever-present danger.