At Willis, a WTW business, our Financial, Executive & Professional Risks (FINEX) team works closely with experts across the employment practices liability (EPL) insurance space to better understand the many facets of our industry. In our “EPL Professionals Series,” we feature a range of voices, from EPL underwriters to labor & employment litigators, coverage counsel and others, each offering their take on what’s shaping the landscape. We aim to shed light on how shifting legal and societal trends are impacting EPL risk, employment litigation and the industry at large.
In this article, we feature Carrie Kurzon, Head of Employment Practices Liability Product at American International Group, Inc. (AIG).
Willis: What impact do you think the U.S. Supreme Court’s decisions in Groff and Muldrow will have on EPL risks?
Carrie Kurzon: The Groff decision established a new definition of “undue hardship” in religious accommodation requests, which requires an employer to show a substantial cost to the employer. Previously, employers only needed to show a de minimis effort or cost. As a result of this decision, we can expect to see an increase in religious accommodation lawsuits filed, which may become more costly to defend.
The Muldrow decision lowered the standard that federal courts had applied for decades on discriminatory transfer claims under Title VII of the Civil Rights Act of 1964. For a discrimination claim to survive, the employee must suffer an “adverse employment action.” For a transfer, federal courts historically held that the transfer must result in a “significant” or “material” disadvantage to constitute an adverse employment action. This changed in Muldrow, where the Supreme Court held that transferees need only show “some harm.”
Although the Supreme Court limited its analysis to adverse employment actions involving lateral job transfers and remained silent as to whether this decision would apply to all employment actions, we have seen Circuit and District Courts across the country interpreting Muldrow to apply to many areas of employer conduct including allegations of several types of discrimination.
Due to these decisions we expect to see an increase in the frequency of claims, including claims that would have previously been dismissed on summary judgment, potentially leading to higher defense costs and more expensive settlements.
Willis: What makes for an effective meeting in the current environment? If you were to attend a meeting now, what would you want to hear from insureds?
CK: I want to hear from companies what they are doing to be proactive regarding their policies and procedures in this current climate. This is particularly important when it comes to disparate impact analyses for reductions in force, as a poorly handled reduction in force can have serious consequences for an employer.
Willis: Have the frequency and severity of EPL claims increased over the past five years? If so, what do you believe is the cause of the increase?
CK: The entire market is seeing an increase in frequency of EPL claims, and there are also indications that severity is on the rise. EPL claims can take a long time to resolve so it’s too early to say conclusively those signs are certain. The resolution of several recent claims suggests a significant social inflation of the costs of defense and settlement of EPL litigation. Social inflation refers to factors that go beyond regular economic inflation and increase insurers' claims costs above what could be anticipated under the usual scope of economic inflation and claim trends. There is a confluence of factors that contribute to social inflation, including an increase in “nuclear verdicts,” which are verdicts in excess of $10 million.
Willis: What impact, if any, have the implementation of mandatory arbitration agreements had on the frequency and severity of claims?
CK: There are times that arbitration agreements are beneficial to insureds, and on balance we prefer to see them as part of our insureds risk mitigation process. From a frequency and severity perspective, although we have seen arbitration agreements limit the number of class actions, we also see more individual claims that would have previously been brought as a class. This is because most arbitration agreements contain class action waivers, which prevents employees from bringing a class action and requires them to file an individual arbitration, leading to the possibility of hundreds or thousands of individual arbitrations. This can be particularly expensive in jurisdictions where the employer must pay all the arbitration fees. Additionally, more cases get tried if there is an arbitration agreement because arbitrators generally do not dismiss cases on summary judgment.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
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Please note that the views and opinions expressed herein are personal and do not necessarily reflect the views and opinions of American International Group, Inc. or any of its subsidiaries, business units or affiliates. Any information discussed herein is for general informational purposes only.
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Any claim scenarios summarized in this presentation are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in any insurance product(s) described herein should request a copy of the policy itself for a description of the scope and limitations of coverage.
Carrie Kurzon is the head of EPL product for AIG Financial Lines, North America, where she is responsible for guiding the strategic direction of the EPL portfolio. She works closely with each business unit to identify trends, mitigate risk, and drive innovation in the EPL space.
