The Time’s Up and MeToo movements have dramatically highlighted the issue of sexual harassment in the workplace. As a result, employers on both sides of the Atlantic are reviewing their workplace policies. Graham Buck reports

Last autumn’s lurid revelations about Harvey Weinstein unleashed the genie from the bottle. Since the New York Times first published allegations against the movie mogul, scores of women have come forward with claims ranging from sexual impropriety to rape. In February New York state prosecutors filed a lawsuit against the Weinstein Company, contending the studio was negligent in failing to protect employees from harassment and abuse.

Ripples from the episode quickly spread as claims of sexual harassment extended to other individuals. The #MeToo movement, set up back in 2006 by activist Tarana Burke for women to demonstrate solidarity on the issue, saw its hashtag go viral after the NYT report.

#MeToo is joined by Time’s Up, a movement formed by Tinseltown celebrities that swiftly raised US$20 million for a legal defence fund and assembled over 200 volunteer lawyers. Both will be used to support individuals who have suffered harassment in Hollywood and other industries. After this year’s Oscars ceremony, a Times Up spokesperson announced: “The fund has already helped over 1,500 women get connected to lawyers and communications help.”

The prospect of a wave of sexual harassment-related litigation has – not for the first time – highlighted that the US has witnessed many more cases than the UK. When Jimmy Savile’s nefarious activities as sexual predator were revealed in 2012 it emerged the British media knew about them for years, but fear of being sued deterred them from reporting.
By contrast, libel actions are more difficult in the US. The burden of proof falls on any plaintiff claiming he/she was defamed in print or online to prove the story is false, so the US media is usually more ready to break a story. This is despite the fact that when a report is disproved, awarded damages are substantial.

Defining the offence

With sexual harassment allegations set to continue, employers both sides of the Atlantic are reviewing their workplace policies.

Under the UK’s anti-discrimination legislation, claims can be brought against both alleged harasser and employer. The Equality Act 2010 defines sexual harassment as “unwanted conduct of a sexual nature which has the purpose or effect of violating someone’s dignity, or creating an intimidating, hostile, degrading, humiliating or offensive environment for them”.

In a guidance note to branches and members, the University and Colleges Union (UCU) defines such conduct as including:

• unwelcome sexual advances, propositions and/or demands for sexual favours.
• unwanted/derogatory comments about appearance or clothing.
• leering and suggestive gestures and remarks.
• offensive material being displayed, including pornographic pictures, page three-type pin-ups or calendars; also electronic form on computer screen savers or such material circulated by email.
• physical contact, such as the invasion of personal space and unnecessary touching.
• offensive feedback or comments via social media.
• sexual assault.

EL and EPL

Where companies have contravened, can they look to insurance to respond to claims?
David Maynard, head of liability underwriting for Axa Corporate Solutions Assurance UK, notes that employers’ liability (EL) is insurance of statutory compulsion covering liability incurred by the employer to the employee in the workplace under tort. Effectively, for an employer to be covered for sexual harassment under EL they would need to be found to have breached their duty of care towards the employee, with the latter suffering some harm or injury.

US companies are more likely than their European peers to also purchase Employment Practices Liability (EPL), a voluntary insurance covering liability incurred by employer to employee arising from a wrongful act. By contrast EPL coverage for sexual harassment is triggered by its occurrence in the workplace, rather than from any specific fault of the employer.

“It should be noted that for both EL and EPL, coverage is not dependant on the acts of sexual harassment having being carried out by the employer (owner/director/ manager) themselves,” adds Maynard.

“EPL is usually written as an element of management liability, as is directors’ and officers’ (D&O) liability coverage. Although there are similarities between the exposures, such policies would be poorly worded to allow overlap. D&O constitutes the wider coverage concept and it is conceivable that EPL could be written a sub-section of D&O specifically.”

Hiscox, which writes EPL, will consider any size company but expresses “strong preference for organisations with fewer than 1,000 employees”. Cover extends to company directors, board members, trustees and employees for claims brought by current, former or prospective employees, arising from their employment or non-employment and relating to:

• wrongful, unfair or constructive dismissal;
• breach of written or implied contract of employment;
• wrongful deprivation of a career opportunity;
• harassment, unlawful discrimination;
• defamation or invasion of privacy.

Cover also includes legal representation costs relating to other official examinations, enquiries and investigations and/or losses arising from an injunction brought by the Equalities and Human Rights Commission.

How would Maynard summarise the European insurance market’s attitude towards EPL? Does it represent a good source of potential new business and revenue, or do insurers fear it is becoming a difficult class to underwrite profitably?

“In a word ‘mixed’,” he says. “EPL isn’t a universally offered class of business. While some might be attracted by increased prominence of discrimination in the workplace, others will be reluctant to embrace it for fear of anticipated claims.

What needs to be assessed is will losses – considering improved risk management – ultimately be adequately funded by achievable premium?

“Underwriting by focusing on sexual harassment in isolation would be a mistake. Although there is anticipation of its increased prominence in relation to workplace actions, it is less strongly correlated to claim incidents than basic economic indicators such as unemployment rates.”

An impending deluge?

While media publicity has focused on historic sexual harassment, Maynard notes that it serves to highlight and promote equality legislation generally. “On this basis it increases EPL’s focus and certainly doesn’t diminish the profile of age or race discrimination. Wrongful dismissal is broadly linked across most categories of EPL and similarly has enhanced prominence from media coverage of any area relating to employment rights.”

However, sexual harassment could become a particular headache for insurers given the long tail nature of liability exposure. “We’ve seen recent press commentary relating to sexual assault claims being settled pre-suit, subject of course to strict non-disclosure agreements (NDAs),” says Brad Barker, senior vice president and senior account executive for Paragon International Brokers.

“It would be naïve to think that just because there isn’t a trend for bringing sexual harassment/assault claims through the UK courts that these claims are not being made and indeed settled for significant sums.”

Most UK claims will be brought via employment tribunals, says Alex Lock, partner at law firm DAC Beachcroft’s employment and pensions group. Three important points apply to this jurisdiction:

1. Time limits for bringing claims are typically three months from the alleged act. The tribunal can extend where it considers it equitable to do so, but this is a matter of discretion. Claimants who seek to rely on long-past events are unlikely to have an extension to allow their claims to be heard. Whatever the current publicity, legislation outlawing sexual harassment has been in force since the Sex Discrimination Act 1975, so claimants are expected to have reasonable knowledge of their right to claim.

2. Awards made by employment tribunals to successful claimants are typically well below those in the US. In 2016-17 the highest award in a sex discrimination claim was £127,230; the median £8,381 and the average was £19,152.

3. Tribunals are a regime where typically each side bears their own costs, regardless of the result. For claimants pursuing a sexual harassment claim, with allegations covering multiple incidents over a protracted period, the potential award is likely to be less than their costs in bringing it to a hearing.

Lock notes that while the number of tribunal claims is rising – with publicity around Weinstein contributing – the biggest factor by far is the Supreme Court’s ruling last July that tribunal fees are unlawful. It immediately became free to issue and pursue claims, which has since led to a 90 per cent increase.

“The exposure of incidents from decades ago certainly highlights latency but while the uncovering of them has led to high profile criminal prosecutions, arguably in the UK at least this hasn’t yet given rise to associated liability awards,” says Maynard. While several performers associated with the BBC were criminally prosecuted the corporation itself hasn’t been named in compensatory action.

“This isn’t to say that as an entity they were complicit in abuse that occurred within their employment but some might speculate that for it to occur on a wide scale over a prolonged period, awareness and prevention of such activity doesn’t appear to have been a priority.”
Barker adds: “In an evolving world, the threat of litigation shouldn’t necessarily be a driver to buy EPL; rather the threat to a company’s reputation should allegations reach the public domain.

“Needless to say, organisations with US exposure should look at this coverage very closely.”


This article was published in the March 2018 issue of CIR Magazine.

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