What started as a tweet from Alyssa Milano in 2017 triggered the ascent of the #MeTooMovement on social media that has transfixed the nation into a cultural phenomenon of revelation and disgust. High profile cases involving allegations of sexual assault against once powerful men in the media and entertainment industries, organized athletic programs, religious organizations and institutions dominate the headlines.
The movement was sparked by The New York Times and the New Yorker investigations into the now disgraced Harvey Weinstein misdeeds that led to his public downfall. Weinstein, who was arrested in May 2018, is accused of using his position as a powerful movie magnate to lure young women into situations where he was able to sexually assault them. Weinstein faces charges of predatory sexual assault, rape and criminal sexual act; in January 2020, the Manhattan, NY criminal trial of Harvey Weinstein began.
Today, the #MeToo Movement is impacting the “C” suite with increasingly more individual and class action lawsuits against corporate practices. According to the Equal Employment Opportunity Commission (EEOC), there has been a surge with respect to sexual harassment charges in the workplace. While the overall number of charges filed with the EEOC decreased in 2018, the number of filed sexual harassment accusations increased 13.6% from the prior year. The EEOC subsequently filed a total of 41 civil lawsuits alleging sexual harassment against corporate employers, representing a 50% increase from FY 2017.
We are also seeing settlement demands on #MeToo Movement-driven claims steadily increasing, based on social, psychological and economic factors combined with today’s anti-big business mentality. Consequences are irrefutable. With an empowered, more aggressive plaintiffs’ bar, cases are harder to settle. Trials, whether civil or criminal, are more dangerous for companies fearing public backlash and reputational harm.
The #MeToo movement is also driving more sensitivity and activism with respect to extending the statute of limitations for child victims of sexual harassment/abuse to pursue relief in court. In 2019, New York State provided a one year window for child victims of sexual abuse to file litigation regardless of when the abuse took place. After the one year grace period expires, victims will have until age 55 to file their suit rather than being precluded from pursuing relief at the age of 23. As of year-end 2019, 24 states will have passed some form of legislation to extend the statute of limitations for survivors of child sexual abuse in criminal and civil cases.
The #MeToo workplace harassment suits and theories employed by the plaintiffs’ bar are evolving; the suits are not limited to allegations that the defendants engaged in harassment, discrimination or retaliation. Now complaints allege that the corporate parent, high level employees, as well as corporate directors and officers breached their fiduciary duties in failing to prevent the alleged misconduct. Insurance coverage that responds to workplace misconduct claims is no longer limited to Employment Practices Liability (EPL) sector. Insurance policies being scrutinized to bear the financial burden of more frequent and severe sexual allegation claims now include every commercial liability segment from General Liability, Directors & Officers Liability, Fiduciary Liability, Fidelity Liability, Errors & Omissions, Miscellaneous Liability and an expanding array of professional management insurance lines.
In December 2019, Weinstein’s bankrupt film studio, Miramax, announced a tentative $25 million settlement with alleged sexual misconduct victims (which is part of an overall $47 million settlement to resolve the company’s obligations). Under the terms of the reported settlement of the class action suit comprised of more than 30 women, the alleged victims will drop their claims against Weinstein and other executives, as well as board members, who would then be shielded against any future liability accusations. Weinstein and his studio are seeking funding for the majority of the settlement from their liability insurance carriers.
In 2017, 21st Century Fox agreed to a $90 million settlement (to be funded by D&O insurance) of a derivative suit filed by its shareholders alleging the company’s management permitted a culture of sexual and racial harassment to permeate the company, ultimately resulting in financial and reputational harm to the company. Among other things, the suit alleged the company paid over $55 million in settlements for sexual harassment and racial discrimination and the toxic work culture the senior management caused the company other substantial harm, including the severance or termination payments the company agreed to pay to Ailes and O’Reilly as well as an estimated $20 million in related litigation costs.
Corporations in the United States continue to face heightened and complex workplace liability #MeToo risks. An emboldened plaintiffs’ bar is driving an influx of lawsuits against corporations and institutions, primarily alleging “negligent supervision” surrounding the sexual offender. Broader awareness and acknowledgement of sexual abuse, harassment and assault amongst the general public have been a game-changer. Corporate employers should work with their broker and insurance partners to deploy a robust risk management strategy focusing on corporate culture, awareness, training and cooperation. In this regard, Ironshore has joined with a premier law firm to offer Ironshore policyholders free access to a Prevent & Protect Portal. The online portal, designed and maintained by Jackson Lewis attorneys, provides the latest information to Ironshore insureds pertaining to workplace topics to help manage their workforce and reduce potential exposure on employment-related liability claims.
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