© 2007 McNees Wallace & Nurick LLC The Value of Employment Practices Liability Insurance Andrew L. Levy McNees Wallace & Nurick LLC Kara E. Neviackas Chubb Specialty Insurance April 2007

© 2007 McNees Wallace & Nurick LLC 2 Outline Legal Environment & Litigation Trends EPL Insurance Solution Loss Prevention Non-Buyer Objections & Selling Tools

© 2007 McNees Wallace & Nurick LLC 3 EMPLOYMENT LAW OVERVIEW Discrimination Claims  Title VII, ADEA, ADA, PHRA  Age, race, gender, national origin, disability, marital status or any other protected trait  Discriminatory Harassment FMLA Leave of Absence Claims Reasonable Accommodation ADA Claims Wrongful Discharge/Tort Claims

© 2007 McNees Wallace & Nurick LLC 4 National Employment Litigation Climate ADMINISTRATIVE PROCEEDINGS:  Over 70,000 charges filed with the Equal Employment Opportunity Commission (EEOC) annually.  In 2005, the EEOC obtained over $270 million in monetary benefits, without litigation!

© 2007 McNees Wallace & Nurick LLC 5 FEDERAL LITIGATION PROCEEDINGS  Nearly 25% of all EEOC charges result in federal court litigation  In 2005, the EEOC filed 417 lawsuits and obtained over $107 million through litigation  In 2005, nearly 17,000 private employment lawsuits were filed filed in federal court. National Employment Litigation Climate

© 2007 McNees Wallace & Nurick LLC 6 The Cost of Employment Claims Defense attorney fees  Typical EEOC $5,000 Federal court litigation  Through discovery process/summary judgment > $50,000  Through trial and appeal > $100,000

© 2007 McNees Wallace & Nurick LLC 7 The Cost of Employment Claims  Back Pay, reinstatement or frontpay, compensatory damages, punitive damages, plaintiff's attorney fees  Approximately 60% of employment discrimination claims result in awards to plaintiffs.  14% of Federal jury awards in discrimination claims exceed $1 million

© 2007 McNees Wallace & Nurick LLC 8  The median award in employment discrimination claims is over $232,000 and the mean award is approximately $580,000.  Median award of age discrimination claims is over $260,000 and the mean award is nearly $800,000  16% of plaintiff verdicts are over $1 million The Cost of Employment Claims

© 2007 McNees Wallace & Nurick LLC 9 The Solution: Employment Practices Liability Insurance Key Coverage Features:  Comprehensive definition of covered allegations: discrimination, wrongful employment decisions, sexual harassment, workplace tort & retaliation  Broad coverage includes protection for the entity and its people  Broad definition of insured persons  Optional third party coverage for sexual harassment and discrimination allegations

© 2007 McNees Wallace & Nurick LLC 10 EPL Key Policy Benefits Transfer the risk in exchange for: – Experienced Defense Counsel – Broad Coverage – 100% Defense Costs Allocation – Loss Prevention Program!!

© 2007 McNees Wallace & Nurick LLC 11 Chubb’s Loss Prevention Program Employment Practices Loss Prevention Guidelines Manuals Model Forms, Model Policies, Newsletters Toll-free Hot Line EPL Loss Prevention Web Site Consultant Services with Premium Reimbursement Web-based Training

© 2007 McNees Wallace & Nurick LLC 12 EPL Loss Prevention Web Site Overview of Program 40+ Specialty Loss Scenarios List of 120 approved vendors for consultant services businesses/csi/chubb 2141.html

© 2007 McNees Wallace & Nurick LLC 13 Loss Prevention Consultant Services Reimbursement for a portion of the cost of services that directly relate to EPL coverage  50% of the cost of services, up to 10% of the EPL annual premium Available each year, during the policy period Preferred rates for law firms, HR consulting firms, and labor economist/statistical firms

© 2007 McNees Wallace & Nurick LLC 14 Non-Buyer Objections Consider this question: Has your Insured’s company made or does it now make critical employment decisions (eg. Demotion, termination, suspension from work) without consulting a human resources professional or outside attorney?

© 2007 McNees Wallace & Nurick LLC 15 Why is this important? Any time your customer’s company hires (or fails to hire) or terminates an employee, your customer is at risk for employment-related allegations and lawsuits. Consider this: GL, workers’ compensation, umbrella, and D&O liability policies may not cover the potential employment practices liability exposures arising from employee interviewing, hiring practices, or retaliation

© 2007 McNees Wallace & Nurick LLC 16 Consider this question: Do your Insured’s employees interact directly with the public, and have they in the past?

© 2007 McNees Wallace & Nurick LLC 17 Why is this important? Your customer may be at risk for allegations of sexual harassment and discrimination made by customers, service providers, and other business invitees An EPL lawsuit can be costly. For the 161 companies in the Chubb study that experienced an EPL lawsuit in the past five years, the average loss (settlement, judgment, and legal costs) was: $1,152,000 * According to the 2005 Chubb Private Company Risk Survey

© 2007 McNees Wallace & Nurick LLC 18 Where Can I learn More About EPL? Customized Loss Call your Local Chubb Specialty Underwriter: Kara Neviackas (717)

© 2007 McNees Wallace & Nurick LLC 19 Legal Disclaimer This presentation is advisory in nature. The presentation is necessarily general in content and intended to give an overview of certain aspects of the Employment Practices Liability Policy. It should not be relied on as legal advice or a definitive statement of the law in any jurisdiction. For such advice, an applicant, insured, or other reader should consult their own legal counsel. Whether or not or to what extent a particular loss is covered depends on the facts and circumstances of the loss and the terms and conditions of the policy as issued. For promotional purposes, Chubb refers to the insurers of the Chubb Group of Insurance Companies. Not all insurers do business in all jurisdictions. Actual coverage is subject to the language of the policies as issued. Chubb Group of Insurance Companies Chubb Specialty Insurance Warren, NJ