Insurance and Sexual Harassment Claims

Sarah Wood , 11 June 2018

Special Counsel Sarah Wood outlines the insurance implications of sexual harassment claims, and suggests risk mitigation strategies for architectural practices.

The recent #MeToo Twitter campaign was set in motion on 15 October 2017 by actress Alyssa Milano after she tweeted, “If you’ve been sexually harassed or assaulted write ‘me too’ as a reply to this tweet”. The tweet has since been followed in 85 countries with 1.7 million tweets. Facebook reported more than 12 million posts about #MeToo in less than 24 hours.

And the movement shows no sign of disappearing. It’s therefore important for all businesses to consider the legal ramifications of sexual harassment and other workplace behaviour.

The research

According to the Australian Human Rights Commission, sexual harassment disproportionately affects women, with 1 in 3 experiencing sexual harassment at some point during their lifetime. However, 1 in 10 men also report experiencing sexual harassment in the workplace.

The Hollywood effect

With the increasing number of people in workplaces reporting sexual harassment, it’s not just Hollywood experiencing an effect on claims. The Hollywood spotlight on the subject may encourage those who would have previously remained silent to go public. We’ve seen it already in Australia with allegations about Don Burke and Craig McLachlan, starting with the few and turning into the many.

Not all will be claims of Harvey Weinstein magnitude, and many will occur within small businesses.

What is sexual harassment?

Last year Matt Damon was criticised for comments that were said to trivialise some forms of sexual harassment. He said there was a “spectrum of behaviour” when it comes to sexual misconduct, and drew a distinction between “patting someone on the butt” and more serious forms of sexual assault. Damon also stressed that the allegations of sexual misconduct in Hollywood did not relate to all men. “I don’t do that” he said, “and most of the people I know don’t do that.”

However, whatever end of Matt Damon’s spectrum it is, if the conduct is unwelcome, it’s illegal.

The Sex Discrimination Act in Australia defines sexual harassment to capture any unwelcome conduct of a sexual nature in circumstances in which a reasonable person, having regard to all of the circumstances, would have anticipated the possibility that the person harassed would be offended, humiliated or intimidated.

This means that the conduct does not have to cause actual offence. The possibility that the person harassed would be offended, humiliated or intimated is sufficient.

‘Conduct of a sexual nature’ obviously includes physical touching, but also includes sexist comments, repeatedly asking a woman out, and sending or displaying sexualised photos or messages.

Employers may be vicariously liable for the actions of their employees, unless they can show all reasonable steps were taken to prevent the conduct. This means it’s essential for all businesses to have a workplace behaviour policy that is current, communicated and implemented when there’s an allegation or finding of conduct in breach.

Other types of claims

Direct sexual harassment claims are not the only possible source of legal claims. Workplace health and safety is another major area to watch. While there hasn’t yet been any Australian prosecution of a workplace for failing to ensure the health and safety of staff and others due to sexual harassment, it is likely only a matter of time.

The duty of directors and officers (D&O) to shareholders may not immediately spring to mind when thinking about sexual harassment claims. But in the United States, 21st Century Fox recently revealed it paid a $90 million settlement, funded by insurance, to shareholders in response to allegations that management permitted a culture of sexual and racial harassment.

The solution?

An increase in claims is a certainty. The solution? Below is a list of risk prevention and mitigation tools which could help:

  • Have a sexual harassment and bullying policy. A good policy should include:
    o   Definitions of terms like ‘sexual harassment’ and ‘bullying’
    o   A clear statement and examples of what is acceptable and not acceptable
    o   A procedure for making claims
    o   A list of possible outcomes if conduct is found, up to termination of employment
  • Have good HR support, including to drive cultural change if necessary
  • Provide training and information
  • Monitor, review and report to boards or leadership teams
  • Get legal advice when necessary
  • Consider Employment Practices Liability Insurance (EPL). EPL insurance can cover a business or individuals for a range of claims such as:
    o   Sexual harassment and discrimination
    o   Wrongful termination
    o   Adverse action (action taken against an employee because they have exercised a workplace right)
    o   Work, health and safety-related claims

Sarah Wood, Special Counsel/Wotton Kearney, is an employment law specialist with extensive insurance expertise. She advises insurers and their customers on all types of employment practice liability matters including sexual harassment and discrimination complaints, unfair dismissals, general protections applications and all things related to the Fair Work Act and state industrial legislation. She also acts in WHS prosecutions and Fair Work Ombudsman investigations.

This article is supplied by Planned Cover. Please speak to your Planned Cover Account Manager or call 1800 810 970 should you wish to explore options of purchasing an Employment Practices Liability insurance policy.