Employment Practices Liability - Summer Reading - No Nonsense Retention by Jeff Kortes

Posted by Joe Monteleone on June 13, 2011

Although it is not our usual province here to do book reviews, I do want to commend to all those who practice in the area of employment practices liability insurance and risk management a very helpful book that offers many practical tips on how to address personnel turnover in an organization.  And, as many who work in this area know, excessive and undue employee turnover is typically a harbinger of increased employment claim and litigation activity.

Jeff Kortes is a Milwaukee-based management consultant with extensive human resources experience in both the public and private sectors.  His book, No Nonsense Retention: Painless Strategies To Retain Your Best People is available at $14.95 in soft cover through his website at www.humanassetmgt.com.

In his book, Jeff notes that there isn’t an organization anywhere that does not have a problem with some type or level of personnel turnover.  The impact of such turnover can range from a monetary impact of three months of salary for a low level employee leaving to as much as four times annual salary for an upper level departure.  Nonetheless, he makes the critical point that there is “good turnover and bad turnover”.

Firing a non-performer or “slug”, as Jeff bluntly puts it, is an example of good turnover.  Although I would caution organizations re liberally using the term slug, I am not aware of any federal, state or local law that affords anti-discrimination protection to slugs!

When your top performers leave, however, that is classic bad turnover, and Jeff gives numerous practical tips on how to minimize this bad turnover and lessening its impact on the performance of the organization.  Maximizing organizational performance must be a conscious and binding management decision from the top down.  In short, there must be a “no nonsense” approach to retaining the best and the brightest in the organization.

What about individual managers?  How do they implement these concepts within their own sector of the organization?  Jeff highlights the following.

  • Develop an upbeat attitude.
  • Communicate well.
  • Always treat people within the organization at all levels with respect.
  • Lead by your own positive example.
  • Care for the people who work for you.
  • Always be genuine.

All of this is important because Jeff notes that most people “quit their boss, not the company”.

Employment Practices and Other E&O Policies: The Breadth of Pending and Prior Litigation Exclusions

Posted by Joe Monteleone on April 18, 2011

Insurers and policyholders frequently focus solely on the “litigation” component in what is frequently referenced as a Pending and Prior Litigation exclusion. The exclusion wording at issue in a recent case in Washington was similar to most other iterations of this exclusion and provided as follows.

This insurance shall not apply to, and the [Insurer] shall have no duty to defend or pay     Defense Expenses for, any Claim . . . for, based upon, or arising directly or indirectly out of any fact, circumstance, situation, transaction, event or Wrongful Employment Practice . . . underlying or alleged in any prior and/or pending civil, criminal, administrative or regulatory proceeding as of [the date specified in the Declarations] (emphasis added).

In a brief Order granting the insurer partial summary judgment, the court in Wendel v. Travelers Cas. And Surety Co. of America, USDC, E.D. Wash., No. CV-10-0028 (Decided March 10, 2011) upheld the validity of this exclusion under the following scenario.

The plaintiff was a dentist with a practice employing a number of females. On May 5, 2004, employee Wiseman filed an action alleging wrongful termination and emotional distress arising from an affair that plaintiff was having with employee Yount. Wiseman was ultimately fired and her domestic partner thereafter informed plaintiff’s spouse of his affair with Yount. Plaintiff terminated Yount after his wife learned of the affair and Yount committed suicide hours after being terminated. The plaintiff dentist purchased the employment practices liability (EPL) policy at issue in 2005 after the commencement of the Wiseman action. In 2007, during the term of a renewal policy, Yount’s estate sued the plaintiff dentist alleging negligence, sexual harassment, infliction of emotional distress and outrage. The insurer denied coverage for this claim based upon the Pending and Prior Litigation exclusion quoted above.

Plaintiff contended that the exclusion was inapplicable because no factual nexus existed between the prior Wiseman suit and the Yount estate’s suit later brought against him. The Court, however, found it sufficient that the Wiseman suit contained allegations of the Yount affair and her subsequent termination and suicide. The Court held that the insurer was entitled to rely upon the extrinsic evidence of the Wiseman allegations in denying a defense to the complaint brought by the Yount estate because it was not relying upon these allegations as being supportive of the truth or scope of the allegations presently made by the estate.

The Eastern District of Washington is not renowned as an insurer-friendly jurisdiction, but its straightforward interpretation of the exclusionary language and allowing the insurer to rely upon extrinsic evidence to support the application of the exclusion was a refreshingly correct result. Indeed, given the nature of the exclusion, the insurer would always have to consider the allegations in a prior proceeding to deny coverage for the present claim submitted to it for coverage. If the plaintiff dentist had EPL insurance in place at the time of the Wiseman action, he could argue that the suit by the estate is interrelated and seek coverage under that policy. If, however, there was no EPL coverage in place at that time, then both the Wiseman and estate actions should remain uninsured. To draw an analogy, a fire insurer should not be made to provide coverage for the building that is already smoldering.