Protection vs Compassion

Dec. 21, 2004
Relying on insurance to prevent sexual bias losses is bad business.

It's been almost impossible this year to escape the sexual-harassment headline frenzy. From the record harassment settlement against Mitsubishi Motor Manufacturing Co. of America to the three U.S. Supreme Court decisions that make employers even more liable for sexual harassment, it's an issue that simply won't go away. I'm somewhat reluctant to add yet another point of view to a topic that's had its fair share of publicity. But one reason sexual harassment and other forms of bias remain in the workplace is this: Too many employers, rather than adopting a zero-tolerance policy toward unacceptable workplace behaviors, are merely protecting their bottom lines with insurance policies. To be specific, employment-practices liability insurance policies costing less than $100,000 annually will protect companies, their directors, their officers, and their employees from as much as $50 million in settlements, judgments, and defense costs arising from workplace employment lawsuits. Astra AB, for example, which settled a much-publicized sexual harassment lawsuit for $10 million, had an insurance policy that was bought in the midst of its legal battles. Granted, insurance is how companies protect themselves against possible disruptions of their businesses, including legal costs from employment lawsuits. But too many companies will react to this year's headlines about sexual harassment and last year's headlines about racial bias by buying insurance to cover their risks, rather than working to create a workplace environment with zero tolerance--that is, an environment where any improper behavior at any level in the company is simply not tolerated. Many CEOs still don't see harassment or discrimination as a compelling business issue, says Martin F. Payson, an attorney in the White Plains, N.Y., office of Jackson, Lewis, Schnitzler & Krupman. "The culture must be zero tolerance every time there is a misuse of a word or a phrase or unacceptable behavior," Payson says. "The senior person must step forward and make it known that that type of conduct will not be condoned, or nothing will change." A tendency among corporations to use insurance to cover risks, rather that work to prevent harassment and bias, is reflected in the material that crosses my desk weekly. More often than not, the amount of information on how to buy employment practices liability insurance outnumbers by at least a 3-to-1 margin the amount of information on how to create a zero-tolerance workplace. Admittedly, given the precarious nature of workplace relationships -- employment claims have doubled since 1991 with the average settlement well over $200,000 -- such liability insurance is needed. But until companies understand that an insurance policy is not a substitute for sound business policies that prevent workplace bias and harassment, these illegal practices will continue. Indeed, if companies and managers were serious about eliminating bias and harassment in the workplace, more of them would advocate this basic tenet of a civilized society: Treat people as you would like to be treated.

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