More companies buy workplace misconduct policies

Companies significantly have increased their insurance coverage against sexual harassment complaints in recent years following high-profile scandals, as corporate America reckons with the growing risks of workplace misconduct.

Employment practices liability insurance plans, which cover sexual harassment, racial discrimination and wrongful-firing claims, have spread rapidly over the past decade from major corporations to midsized and smaller businesses, industry experts say.

But lawyers and some women's groups note the policies, which shield businesses and executives from costly lawsuits and reputational damage, also may help perpetuate abuse by allowing companies to avoid confronting the problem head-on.

'Payouts can provide some monetary help and peace of mind going forward, but they create a stronger culture of silence,” said Kim Churches, CEO of the American Association of University Women. 'It doesn't only prohibit victims from speaking up. It means we're not encouraging colleagues to stand up to sexist language or harassment and call it out on the spot.”

Sexual harassment surged to public attention in 1991 when law professor Anita Hill accused her former boss and then-Supreme Court nominee Clarence Thomas of repeatedly asking her out on dates and talking about porn while at work. At that time, only five insurance companies offered employment practices liability insurance policies, according to the Betterley Report, which tracks such trends.

Victoria Stone, a Los Angeles insurance broker said she sensed a business opportunity and mailed out fliers to her clients urging them to adopt those early policies. Few took her up on the offer. Even a decade later, some remained skeptical.

Now, though, practically all of the roughly 200 business leaders she works with have bought a plan, Stone said. As accusations mounted last month against the Hollywood mogul Harvey Weinstein, two more opted in. One of the buyers was a small factory with just 39 employees, most of them men.

'So many people feel like, ‘it'll never happen to me,'” said Stone, senior vice president at Poms and Associates Insurance Brokers in Los Angeles. Now, she added, 'more people are pulling the trigger” - including one client who reluctantly purchased a plan, she said, and was later hit with a $300,000 sexual harassment and wrongful-termination claim.

'He hasn't stopped thanking me,” Stone said.

U.S. companies spent an estimated $2.2 billion last year on insurance policies covering the legal fallout from sexual harassment, racial discrimination and unfair-dismissal accusations. The market is projected to grow to $2.7 billion by 2019, according to MarketStance, a research firm that tracks insurance trends.

That's a fraction of what enterprises spend on legal and medical malpractice insurance, but industry experts said employment practices liability insurance coverage is surging into the mainstream, with the biggest growth coming from small and midsized companies.

About 41 percent of businesses with more than 1,000 workers report having some kind of plan to cover sexual harassment and discrimination, said Frederick Yohn, managing director of MarketStance.

About one-third of companies with at least 500 employees carry such coverage, though it remains unusual for start-ups, Yohn said. Only 3 percent of companies with fewer than 50 carry such coverage.