June Update – Claims Increasing against Law Firms, Employment Lawsuits and the Supreme Court

Malpractice Claims Against Law Firms Increasing

In a recent study on the claims experience of seven of the top law firm insurance carriers in the industry, an interesting and alarming trend emerged.  The trend showed an increase in the frequency of law firm claims, and an increase in claims whose total payouts exceed $50M.  Six of the participating insurance companies reported an increase in claims paying out $50M or greater.  Five of the seven reported an increase in claim reports in 2012 over 2011.  The reason for these claim increase is speculative, but real estate services, mergers, lateral hires and work done during the recession are all being listed as major contributing factors.

Firms should take careful note of this trend, as it can directly impact the pricing and terms of their insurance plans in the future.  Many firms find their insurance expense to be the third or fourth most expensive item in their budget and as claims increase industry-wide, insurers may need to increase rates across the board.  Risk management and good internal controls is imperative to keep premiums low.  It is also important to test the market periodically to assure that your firm is obtaining the most favorable terms.  Contact us to formulate a plan that protects your firm.

Pregnancy Bias Settlement

James E. Brown & Associates in Washington State has agreed to a $18,000 EEOC settlement after rescinding a job offer made to an associate when they discovered she was six months pregnant. The woman was interviewed when she was four months pregnant, when the job offer was made two months later she responded to it by email inquiring about the firms maternity leave policy and disclosing she was six months along. The offer was revoked later that day. The firm also agreed to a two-year consent decree to put new procedures and staff training in place.

Supreme Court Rules on Supervisor Retaliation

In another employment related matter this month, The Supreme Court ruled on the definition of “supervisor” as it relates to workplace hostility.  The matter arose after a woman working at a University’s dining services department experienced hostility, discrimination and harassment from a catering specialist who also worked at the same site.  The woman sued the university for creating a hostile work environment.  The catch was that the catering specialist had no managerial or supervisory role of the woman, so the University issued the defense that they did not have strict or vicarious liability in the matter since the catering specialist was not a “supervisor”.

The Court ruled in the University’s favor and explained that “an employee is a ‘supervisor’ for purposes of vicarious liability under Title VII if he or she is empowered by the employer to take tangible employment actions against the victim.”  This rejects the EEOC’s definition of “supervisor” which is much broader and less defined.

It is important to take note that vicarious liability can still be assessed to an organization if harassment is reported, but the company fails to take steps to mitigate or stop the harassment.  The court also stipulates that there may be liability if the employment decision power is concentrated to a small group of people – even if that group does not directly supervise each person for whom their actions impact.

Creating a hotline to report abuse and taking each report seriously will help mitigate lawsuits.  Contact ProtectLawyers.com to discuss ways to protect your firm.