Why Are We Rushing Hiring and Return to the Office? 6 Critical Risks Employers Might Not Know About

Mental health, workplace injury and more. Here's what employers need to assess before bringing workers back into the office after shutdown.

By: Ed Hanna and Anthony Bellucci | July 22, 2022

Workplaces across the U.S. look markedly different today compared to two years ago.

The pandemic has changed nearly every aspect of when, where and how we work. Workforces have gone remote, new personal protective equipment has been introduced and safety guidance continues to change.

Additionally, employees are changing jobs at unprecedented levels. Companies across all industries are struggling with talent gap issues and meeting increasing employee demands. Flexible work environments have become not just normal but expected.

This creates opportunities for employers to deepen talent pools by looking more broadly.

Approaches have varied between instituting flexible to remote and hybrid work policies, rebalancing salaries, enhancing benefits offerings and more. Complexities are further added by hiring new staff, implementing new training requirements and setting new, fair office policies.

During times of great change, new risks inevitably emerge.

The workplace is no exception, and risk managers are now tasked with coming up with strategies to prepare for these risks and potential areas of human capital and liability. However, some risks can be difficult to identify as the modern workplace continues to evolve.

As risk management and insurance experts, we’ve been watching these dynamics unfold and have identified several areas risk managers must monitor. Below are six critical risks that employers should know about and address going forward:

1) Employment Practices Lawsuits

Flexible remote work policies, while enjoyed by many employees, can introduce instability to the workplace when they’re not implemented properly.

Ed Hanna, vice president, enterprise risk management practice leader, Conner Strong & Buckelew

Companies that adopt flexible remote work options can face employment practices lawsuits if some employees feel they aren’t given the same opportunities as others.

For example, if an employee’s in-office schedule aligns with their manager’s more than their peers and receives a promotion, other employees may feel they didn’t get the same chances to demonstrate their qualifications. This can lead to discrimination lawsuits that trigger employment practices liability claims.

2) Workforce-Related D&O Claims

For many reasons outside of management’s control, the pandemic has caused performance to suffer at countless businesses over the last several years.

However, disappointed shareholders often point the finger at company leadership and can blame them for mismanagement in a lawsuit.

Even if the drop in performance was caused by mandated shutdowns, declining demand, travel restrictions or any number of COVID-related reasons, shareholders can claim that leadership failed to properly retain and manage talent throughout the pandemic.

These lawsuits can trigger directors and officers insurance claims and lead to significant costs if not handled properly

3) Discrimination Lawsuits

Companies implementing return-to-office policies must be careful not to discriminate against employees who may be considered higher risk of suffering a negative outcome from a COVID infection.

Similarly, employees who are more regularly exposed to more individuals or live a lifestyle that increases their risk of infection cannot be treated any differently than the rest of the workforce.

If managers set an in-office work schedule that employees deem is unfair, employers could face costly discrimination lawsuits.

4) Business Interruptions from COVID Outbreaks

While many factories, stores and office buildings are back to operating at full capacity, COVID infection remains a persistent threat.

“Super spreader” events at the workplace can lead to multiple employees getting sick at the same time and being unable to work. This can cause significant business interruptions that can impact financial performance.

However, most business interruption policies today have exclusions for COVID infections and have been reluctant to reimburse companies for related losses.

This makes the implementation of robust workplace safety policies that limit the potential for “super spreader” events even more important.

5) Workplace Injuries at Home

Employees are working from home and remote office spaces now more than ever.

This fragmentation of the workforce introduces new challenges when it comes to reporting, investigating and filing workers’ compensation claims.

When a workplace injury happens in the home office, delays inevitably arise in the reporting process. It is also much more difficult to investigate the event when there are no witnesses present.

Determining whether the accident occurred while an employee was performing their job introduces another gray area to consider.

As a result, company leadership should revisit their workplace safety and injury reporting policies to account for remote workers.

6) Deteriorating Employee Mental Health

The pandemic changed our lives forever and unfortunately impacted the mental health of countless workers.

For some, being called back to the office has exacerbated these issues and triggered even higher levels of stress.

Mental health issues have been linked to lower productivity and satisfaction, which can lead to employee attrition. Employers should train managers to keep an eye out for the symptoms of mental health issues and direct employees toward all resources available to them in their benefits plan.

Stay Vigilant

Keeping on top of these evolving risks will require risk managers to constantly reassess their employment practices and identify new potential areas of liability as they emerge.

Anthony Bellucci, vice president, senior claim consultant, Conner Strong & Buckelew

Further, risk managers should work closely with their peers in human resources to ensure practices for attracting and retaining talent include strategies to address these risks. This is an ongoing effort that requires the consistent attention of risk management departments and their stakeholders.

Thankfully, there are partners that can help you manage these risks and set policies that limit your liability. The right partners can help you keep a close eye on the evolving workforce landscape.

By identifying emerging risks that may be hiding in plain sight and developing a plan of attack, companies can best protect their business now and in the future. &

Ed Hanna, CIC, is the Vice President, Enterprise Risk Management Practice Leader at Conner Strong & Buckelew, and Anthony Bellucci is Vice President, Senior Claim Consultant at Conner Strong & Buckelew.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.