The COSO Framework for Internal Control
February 12, 2025
Perception which is derived from the term “Percept” refers to a series of processes which we have to undergo to make sense of the stimuli which we encounter mentally by organization and interpretation of information about the environment we live in or are subjected to. Sensory receptors detect the stimuli or the sensory information and […]
It is common for insurance companies to not hold the entire risk that they underwrite on their own portfolios. Instead, insurance companies try to find ways and means to offload some of this risk to other entities. This is common with all types of insurance. However, it becomes more pronounced with catastrophe-related insurance. This is […]
Every leader has a personal leadership brand which might be carefully cultivated or intuitively perceived by leaders themselves and their followers. A personal leadership brand is an exclusive and a specific approach of a leader to address challenges and manage his/her transactions with their subordinates or followers. The best part of having a leadership brand […]
Politics is inevitable wherever there are groups of people and wherever there are blocs of people competing for the same set of scarce resources. In this context, it is indeed the case that organizations have their own share of office politics due to the prevalence of power centres and interest groups each with competing and […]
The definition of operational risk has been narrowed down. This has helped organizations better manage their operational risks. All operational risks can now be traced to four basic causes viz. people, processes, systems, and external events. However, merely stating a risk as a systems risk does not provide too much information. There is no actionable […]
In 2017, Forbes magazine named #MeToo movement as the “person of the year.” This is because the #MeToo movement has shaken the corporate world to its very core. It is a sad fact that sexual harassment still remains a reality in the workplace.
For instance, it is estimated that at least one in three women who work in a full-time job will face some sort of sexual misconduct during the course of their lives.
These numbers are alarming. What is even more alarming is that high flying corporate executives and media personnel were caught up in this #MeToo storm. In some cases, the alleged sexual harassment did actually take place whereas, in others, the women involved were looking to make a quick buck.
Regardless of the final verdict, it needs to be understood that allegations made under the #MeToo movement can have serious financial consequences. In this article, we will have a closer look to understand how insurance can be used to mitigate some of the losses that may arise because of such claims.
In most cases, sexual harassment claims are indeed covered by an insurance policy. This is because it is standard practice for most companies to have directors and officers insurance policy. This policy is meant to protect the key personnel of a company against any claims including claims of sexual misconduct.
However, in many cases, expenses arising as a result of sexual harassment claims may not be covered. Typical examples of these cases are as follows:
Extended workplace means any place where the key personnel are supposed to be present in relation to their work. This includes places such as airports, hotels, etc. Hence, if the alleged sexual misconduct incident happened off business hours and in a place not connected to the business, insurance companies may deny making any claim payments
A wide variety of company executives may become a party to sexual harassment claims. Some of the common roles are listed below.
Sexual harassment claims lead to a wide variety of financial losses for the company. Any expense which can be directly attributed to the sexual harassment claim is usually covered by the insurance policy.
Insurance companies usually cover the fees associated with such defense cases. This may include payments related to lawyers’ fees as well as money charged by private investigators (if any)
It is important to understand that insurance companies are required to help protect the clients regardless of whether sexual misconduct has actually taken place.
Hence, insurance payouts will be applicable regardless of whether the defendant is found guilty or not. However, it also needs to be understood that most insurance companies levy a cap on the amount which they will pay under the directors’ and officers’ policy. Once this amount is exhausted, the insurance company will not be liable to make any more payments.
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