For many, the highlight of this year's Golden Globe awards wasthe powerful speech Oprah Winfrey gave about the issues raised inHollywood regarding sexual harassment. It's a situation thataffects all industries, and it's a story that insurance brokers andagents should heed.

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Lawsuits filed by employees against current, former and evenprospective employers have been on the rise since the 1990s.According to a study conducted by Hiscox in 2015, U.S.-basedcompanies had at least an 11.7% chance of having an employmentcharge filed against them.

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Related: Insights for handling a sexual harassmentclaim

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The number of discrimination charges filed with the Equal EmploymentOpportunity Commission (EEOC) increased from 89,385 in 2015 to91,503 in 2016. Moreover, median awards are on the rise: JuryVerdict Research data from Thomson Reuters show that in 2015 (thelatest data available) the median award in personal injury cases(of which sexual harassment is a component) was about $86,000, upfrom $75,000 in 2014. Let's not forget cases like Fox News, whichin 2016 agreed to pay $20 million to former broadcaster GretchenCarlson to settle a sexual harassment lawsuit against former FoxNews CEO Roger Ailes — or Ani Chopourian, who in 2012 won more than$82 million from Catholic Healthcare West. While these cases areextreme, a business that doesn't have the right coverage can foldin the blink of an eye.

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Large corporations typically have substantial employment practices liability insurance (EPLI)coverage in place and are prepared to deal with most employmentlawsuits. However, small and medium-sized enterprises (SMEs) orstart-ups are the most vulnerable to employment claims. They oftenlack a legal department or employee handbook detailing the policiesand procedures that guide hiring, disciplining or terminatingemployees. They may also have a less-than-adequate human resourcesdepartment.

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According to a Chubb study, 67% of companies that have 25 to 49employees don't purchase EPLI coverage; 61% of companies with 50 to249 employees don't buy it, and 48% of businesses with 250 or moreemployees refrain from carrying the coverage. Agents and brokersmust educate their business clients about the need for EPLI in sucha litigious environment. They can let their business clients knowcoverage is available either as an endorsement to theirBusinessowners Policy (BOP) or as stand-alone coverage.

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The cost of EPLI coverage depends on the type ofbusiness, the number of employees and such risk factors aswhether the company has been sued over employment practices in thepast. The policies will reimburse your client against the costs ofdefending a lawsuit and for judgments and settlements. The policycovers legal costs whether the company wins or loses. (The averagecost of defending a case through discovery and a ruling on a motionfor summary judgment costs an employer between $75,000 and$125,000, according to Hiscox).

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Related: Insurers now need to anticipate workplace diversityissues

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Stop problems before they start

An important part of the overall risk management process is tominimize problems in the first place:

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        • Create effective hiring and screening programsto avoid discrimination in hiring.
        • Post corporate policies throughout the workplace and includethem in employee handbooks so policies are clear to all.
        • Show employees what steps to take if they are the object ofsexual harassment or discrimination by a supervisor.
        • Make sure supervisors know just where the company stands andwhat behaviors are not permissible.
        • Document everything that occurs and the steps the company istaking to prevent and solve employee disputes.
        • Boards of directors can be exposed to an employment liabilitylawsuit, too. Make sure your client purchases Directors andOfficers' (D&O) coverage and broadens it to include coveragefor employment practices liability.

HR policies, procedures, and training programs can help preventlosses, but they're not a panacea for what's unfolding in today'slegal climate.

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Loretta Worters is vice president of Communicationsfor the Insurance InformationInstitute (I.I.I.). She can be reachedat [email protected].

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The opinions expressed here are the writer's own.

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See also:

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Top 20 companies for women in the finance andinsurance industries

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Meet the 14 women who run state insurancedepartments

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