THE BESTGUARD NEWSLETTER

Protecting Private Security Companies Against The Rising Tide Of Sexual Harassment And Discrimination Lawsuits

Private security companies and the insurance companies that insure them are all too familiar with lawsuits alleging false arrest, assault or failure to provide adequate security brought by third parties outside of their organizations. Now security companies have more to worry about because of lawsuits brought from within their organizations by their own employees alleging sexual harassment, discrimination and wrongful termination. Female guards, investigators and alarm personnel are alleging that they are being sexually harassed by their fellow employees and even their supervisors. Other female employees are alleging that they are being discriminated against because of their gender. Even some male personnel are suing for sexual harassment. Older security personnel are alleging that they are being discriminated against because of their age. African-American and Hispanic employees are alleging that they are being discriminated against because of their race or ethnic background.

These sexual harassment, discrimination & wrongful termination claims filed by employees against their employer are termed wrongful employment practices by insurance underwriters today. The standard Comprehensive General Liability Insurance Policy (CGL) once covered these claims, but approximately 25 years ago the Insurance Industry decided to insure this significant liability exposure separately. They created a separate form of coverage called an Employment Practices Liability Insurance Policy (EPLI) and they began to exclude it under their standard CGL Policy.

One of the first Private Security Industry EPLI claims that this writer ever heard about occurred on the West Coast about 30 years ago. It involved a Los Angeles security guard service that had the misfortune of being sued by one of their guards for age discrimination. Because it happened so long ago, it was still covered under the security company’s standard CGL Policy.

This particular security guard company was protecting the residences of one of Hollywood’s greatest living legends at that time. The owner of the company was called one day by the movie star’s longtime manager and told to replace one of his guards, because he felt the guard had grown too old and could no longer perform his duties adequately. The guard was in his late seventies, which still made him a few years younger than his famous client. The insured felt terrible about replacing the guard, who was an old and trusted employee and he knew that his guard had become very attached to the movie star and his wife. To be certain that the manager was right about the guard, he paid an unexpected visit to his client’s residence only to find that his guard didn’t even recognize him, his employer.

Knowing that it was time to replace his old trusted guard, he called him in and told him that he was reassigning him to another guard post without giving him a specific reason for the move. The guard refused the reassignment and quit on the spot. A few weeks later, the insured received suit papers from an attorney representing the guard alleging that his client had been discriminated against because of his age and wrongfully terminated. The insurance company defending the insured ultimately decided to settle the claim for a substantial sum of money rather than fight a lawsuit they felt they couldn’t win.

This was certainly a classic Employment Practices Liability Insurance (EPLI) claim and it points up clearly the difficulty in dealing with claims such as these. If the guard owner hadn’t replaced the aging guard, he ran the risk of not only upsetting his client, but also exposing his company to a lawsuit for negligent supervision should the guard’s failing performance create an unsafe condition for his client. On the other hand, should he reassign the guard to another less attractive position, he ran the risk of being sued for age discrimination, which is in fact what ultimately happened.

Claims such as this were unusual back then, but nonetheless covered by the standard Comprehensive General Liability Policy (CGL). Today, claims such as these are quite commonplace and yet this same CGL Policy no longer covers them and, in fact, specifically excludes them. As a result, more and more discrimination and sexual harassment lawsuits by employees of private security companies are being routinely denied by their insurance companies. Unfortunately, this writer has seen many employment practices claims denied over the years to the consternation of numerous security owners/managers.

Here are some examples of some recent EPLI claims involving private security companies that were denied.

• A Southern guard service was sued by a former senior executive of the company alleging that she was being pushed out of the company because she was a female and because of her age. The liability carrier for the guard company denied the claim.
  
  
• A security company in the Northeast was sued for sexual harassment by a young male security guard who failed to show up at his guard post for three consecutive nights. His frustrated guard supervisor in a moment of anger threatened to place the guard’s reproductive organs in a vice if he failed to show up at his guard post the following night. Again, the guard company’s insurance company denied the claim.
  
  
• Another guard service out West was sued for pay discrimination by two minority security guards who alleged that they were being paid less that two Caucasian guards who were performing the same guard duties they were. Once again, the guard service’s CGL insurer denied the claim.

Because the security companies were not carrying EPLI coverage, these claims had to be defended without the benefit of insurance thereby endangering each company’s financial wellbeing. The ultimate resolution of the claims is still unclear, but anyone of them could end up costing hundreds of thousands of dollars in today’s very scary legal environment.

Private security companies need to purchase Employment Practices Liability Insurance (EPLI) to protect their companies against these potentially damaging claims. What precisely does EPLI cover? It covers sexual harassment. With more women entering the private security workforce, the potential for sexual harassment claims is increasing. It covers all kinds of discrimination. With more women, elderly, minorities and disabled entering the private security field, there is much fertile ground for plaintiff attorneys to bring lawsuits against private security companies alleging discrimination in the workplace. It covers wrongful termination. Usually, wrongful termination claims are brought in conjunction with discrimination claims. These claimants usually allege that they were wrongfully terminated because of some sort of discrimination. In addition, claimants sometimes allege failure to exercise proper duty and care during their termination.

To summarize, sexual harassment, discrimination and wrongful termination lawsuits by employees of private security companies is a growing problem for the Private Security Industry. The only insurance solution to this growing problem is Employment Practices Liability Insurance. Talk to your insurance broker today about obtaining an EPLI quote for your company to protect you against these claims that are not covered by your Commercial General Liability Policy (CGL).

In the next issue of the Brownyard Programs’ Newsletter, we will discuss third party sexual harassment and discrimination claims as contrasted to the first party EPLI claims which this article discussed. Third party claims involve employees of the client of the private security company and other third parties alleging harassment or discrimination by the security company’s employees. It is another area of significant legal concern to private security companies that is not often addressed until a claim is presented.

back to top

Preserve Your Valuable Documents

We all have vital documents that should be treated with the utmost care and concern. Marriage licenses, birth certificates, wills, deeds, mortgage papers, insurance information, stock and bond certificates - these are just a few of the essential papers most Americans have on hand, but probably aren't caring for or storing properly.

The UPS Store offers this handy top-ten list of quick and easy tips for preserving valuable documents.

1. Keep copies of documents in two separate "safe" places (e.g., safe-deposit box, home fireproof safe or file cabinet, at the office or with an accountant). Make sure to store records in a stable environment away from sunlight, bright lights and water pipes.
2. Store the following documents in a safe-deposit box: copies of wills, deeds, titles, licenses, mortgages, stock and bond certificates, employment contracts, prenuptial agreements, adoption papers and naturalization papers. (Remember that only certified copies of vital records can be used to establish identity. Any other copies can only prove that the document once existed.)
3. For records kept at home, use a fireproof safe or file cabinet to store titles to cars, boats or other vehicles, insurance policies, bank statements, W-2 forms, extra copies of wills, income statements, employment benefits and passports.
4. Save all records of home improvements. This may help resolve disputes with insurance agents in the event of a disaster.
5. Hang on to tax returns (including W-2s) forever, particularly if you own a small business. The IRS has three years from an annual return's due date to audit for that year. But if the IRS suspects fraud, there is no limit to how far back it can search for evidence.
6. Review monthly checking account statements. Once each deposit is confirmed, shred the corresponding deposit slip.
7. Hang on to receipts and credit card statements for any appliance under warranty.
8. Be sure to inventory and video all expensive household items. Store the video in a fireproof safe or safe-deposit box.
9. Don't forget items that have sentimental value. Budget time to copy or scan one-of-a-kind items like cards, letters and photographs.
10. And, most importantly, draw up a list that details the location of every important record. This list should include the contact information of individuals family members may need to reach regarding specific financial affairs (e.g., accountant, stockbroker, lawyer, financial advisor, insurance agent and bank officer). Keep one copy in a safe-deposit box; give one to an attorney and another to a relative or close friend.

back to top

Although Still High, Rates Of U.S. Identity Fraud Dropping

A new report from Javelin Strategy & Research says that identity theft remains a major problem, with Americans losing $45.3 billion in 2007, but a drop in fraud cases suggests that more consumers and businesses are winning the battle against criminals.

Losses declined 11 percent from about $51 billion in 2006, according to the fourth annual study. The average loss fell 6 percent to $5,574 from $5,920.

According to Reuters, the study also says that as banks and retailers beef up their in-store and online security systems, frauds are resorting more to the phone and the mail to prowl for victims.

Read the entire article

back to top

Lloyd's Insures Winemaker's Nose

LONDON (Reuters) - The Lloyd's of London insurance market has insured the nose of a leading wine maker and taster for 5 million euros (3.9 million pounds), covering the Bordeaux producer against the loss of his nose and sense of smell.

Lloyd's is famous for creating policies for giant corporations but also for insuring celebrity limbs, from Fred Astaire's legs to the hands of Rolling Stones' Keith Richards.

Ilja Gort, the Dutch owner of Chateau de la Garde in Bordeaux, producer of Tulipe Wines, said his nose could distinguish millions of different scents and was essential to guarantee the quality of his wines.

"The nose and sense of smell of a winemaker are as important as the fingers of a chef," said Jonathan Thomas, lead underwriter at Watkins Syndicate who co-insured the policy.

Lloyds worked with Allianz Nederland and British reinsurance broker Benfield to create the policy, co-insured by Watkins.

Gort's will not be the first nose insured by Lloyd's, which famously insured U.S. comedian Jimmy Durante's trademark. It also insures the taste buds of restaurateur Egon Ronay.

(Reporting by Clara Ferreira-Marques)

back to top