The Wall Street Journal - July 3, 1996
Sanjay Bhatt, Staff Reporter of The Wall Street Journal

The coverage, to be sold by Lockton Cos.-Tennessee and aimed at restaurants, law firms, retailers and others, is the latest in a string of insurance products tied to discrimination laws and lawsuits.

"With the civil-rights movement continuing to grow, we see this policy as part of a comprehensive corporate insurance package," says Scott Davis, president and chief executive officer of Lockton Cos.-Tennessee, a unit of Lockton Cos., based in Kansas City, Mo.

The market for so-called employment-practices liability insurance was born after Congress passed the Americans With Disabilities Act in 1990 and the Civil Rights Act of 1991. Those laws dramatically ratcheted up the damages employees could collect from companies for civil-rights violations.

In response, many insurers began excluding coverage for such claims from general-liability policies, and instead offered policies specifically designed to cover employers in case workers claimed civil-rights violations.

The new laws -- and the insurance policies, which dangled big damage awards -- fueled a boom. Over the past six years, the number of discrimination claims filed with the Equal Employment Opportunity Commission, which investigates such cases, has soared 41% to 87,529.

Then, in 1994, a new area of coverage presented itself, when Flagstar Cos.' Denny's chain paid $46 million to settle claims from black customers -- whose claims couldn't be included under a standard employment-practices policy.

Now, Lockton is hoping to plug this new insurance gap, covering suits for discrimination or sexual harassment by a company's clients, customers or patients. In another twist, the policy includes coverage for punitive damages resulting from intentional acts (state law permitting). Most policies just cover compensatory damages, and often don't pay if intent is proved.

Experts say Lockton's product may follow the same path as the older employment-practices policies, creating a new insurance market by triggering an exponential increase in lawsuits against companies, this time from the public. (Only about 40 third-party employment-practices suits have gone to jury trials since 1990, according to Jury Verdict Research, a Horsham, Pa., research firm.)

Some observers worry about the new product on moral grounds. "Is it good policy to allow someone to discriminate at will and insure against it?" asks Jill Jinks, president of Insurance House, an Atlanta-based insurance wholesaler. "That's not what insurance is for. . . . It becomes a public-policy issue."

But Mr. Davis insists Lockton is following the same business principle behind existing policies -- protecting a company's assets. And, he adds, Lockton won't issue a policy without approving a client's human-resources program. "In no way does this policy take the place of effective human-resource controls," he says.

960703
WJ960702

Copyright © 1996 - The Wall Street Journal. Reproduction of this article (other than one copy for personal reference) must be cleared through the WSJ Permissions Desk.

Always watch for outdated information. This article first appeared in 1996. This material is designed to support, not replace, the relationship that exists between you and your doctor.

AEGiS presents published material, reprinted with permission and neither endorses nor opposes any material. All information contained on this website, including information relating to health conditions, products, and treatments, is for informational purposes only. It is often presented in summary or aggregate form. It is not meant to be a substitute for the advice provided by your own physician or other medical professionals. Always discuss treatment options with a doctor who specializes in treating HIV.

Copyright ©1980, 1996. AEGiS. All materials appearing on AEGiS are protected by copyright as a collective work or compilation under U.S. copyright and other laws and are the property of AEGiS, or the party credited as the provider of the content. .