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1. Employment Practices Liability And Litigation Trends Presented by

2. Employment Practices Liability And Litigation Trends Overview • EPL Exposures • EEOC Class Action Initiative • Current Trends • Genetic Discrimination Legislation • Retaliation Claims • Mental / Psychiatric Disabilities • Age Discrimination Claims • Whistleblower Claims • Sexual Orientation/Same Sex Harassment • FMLA / ADA Mixed Claims • Market Update

3. EPL Exposures • Broadly speaking, EPL policies cover: • Wrongful discharge, also wrongful demotion or discipline; • Harassment, including sexual harassment, whether arising from a “quid pro quo,” or hostile work environment; • Discrimination, including but not limited to actions based upon age, gender, race, color, national origin, religion, sexual orientation, pregnancy or disability; • Retaliation for exercise of statutorily protected rights; • Defamation in connection with a perofrmance evaluation or employee reference; • Wrongful failure to promote or deprivation of career opportunity • “Third party” (i.e., non-employee) civil rights claims.

4. Employment Practices Liability And Litigation Trends EEOC Class Action Initiative • Increased commitment on part of EEOC to filing more class actions over systemic discrimination. • High cost of defending against class actions may prove burdensome for employers. • Probable cause findings by EEOC on the rise, from 2.3% (1992) to 6.1% (2003). • Settlements by EEOC have increased from $136M (1995) to $272M (2005). • Figure does not include private party litigation, only cases brought by EEOC itself on behalf of aggrieved employees.

5. Employment Practices Liability And Litigation Trends Genetic Discrimination Legislation • Bill barring discrimination by employers & insurers based on genetic information nearing congressional approval. • Proposed law would forbid employers from using genetic information to make hiring, firing and personnel decisions. • Currently, no federal law that protects employees from this type of job action. • Today, few EPL policies contain language expressly covering such claims.

6. Employment Practices Liability And Litigation Trends Retaliation Claims • Fastest growing area of EPL litigation. About 30% of charges filed with EEOC in 2006 included charges of retaliation. • In 2004, EEOC settlements in this area alone totaled $90 million. • Supreme Court’s 2006 decision in Burlington Northern broadened retaliation to include job transfers or changes in work schedule. • Plaintiff no longer needs to prove monetary loss, only that the action could have a chilling effect on the exercise of workers’ rights.

7. Employment Practices Liability And Litigation Trends Mental / Psychiatric Disabilities • The data suggests that plaintiffs with psychiatric disabilities are faring worse in court than those with physical disabilities. • Surveys of such plaintiffs indicate that they are less likely to obtain monetary or other relief, and more likely to be dissatisfied with the adjudicatory process. • This lack of a sense of efficacy on the part of plaintiffs could translate into fewer settlements and increased litigation costs. • Conditions qualifying under ADA include: • Schizophrenia; • Bipolar Disorder; • Depression; and • Anxiety disorders (depending on severity).

8. Employment Practices Liability And Litigation Trends Age Discrimination Claims • Age discrimination claims are likely to grow as the workforce continues to age. • Supreme Court’s ruling in City of Jackson, essentially held that disparate impact claims are permissible under the ADEA. • Some claims arising under ERISA also contain allegations of age discrimination. • Most EPL policies exclude ERISA claims. However, coverage is available either through an endorsement to the EPL policy, or as a stand-alone “Fiduciary Liability” policy. • Movement of energy industry away from Defined Benefit plans and toward 401(k) plans could spur additional age-based litigation.

9. Employment Practices Liability And Litigation Trends Whistleblower Claims • Sarbanes-Oxley prohibits retaliation against an employee for reporting violations. • False Claims Act, which permits employee recovery of overpayments made by Government to a private party, also prohibits retaliatory action by employer. • Claimants increasingly take advantage of state laws prohibiting retaliation for the exercise of statutorily protected rights.

10. Employment Practices Liability And Litigation Trends Sexual Orientation / Same Sex Harassment • Same-sex harassment claims under Title VII increased by 14% in 2006; • EEOC recently settled an older male-younger male harassment case for $765,000. • Additionally, state and local laws increasingly prohibit discrimination on the basis of sexual orientation or preference.

11. Employment Practices Liability And Litigation Trends FMLA / ADA Mixed Claims • More workers using family leave to care for ailing parents. • Claimants may also assert, under ADA, that discriminatory action was taken because of employee’s relationship with disabled person. • Talk in Congress of amending FMLA to mandate paid time off (currently employer’s discretion whether to offer paid or unpaid).

12. Employment Practices Liability And Litigation Trends Market Update • Capacity: Over $1 Billion • Contract Terms: Insurers are willing to modify/broaden the policy • Punitive Damages: US – where insurableBermuda: Wrap policies • Pricing: Declining