Trade associations provide essential services to their industries and memberships. However, employers face many of the same risks from liability claims for employment practices as commercial firms. Allegations of discrimination, harassment, or other labor issues can negatively affect the finances and reputations of trade groups and their leadership.
Understanding how directors & officers (D&O) and employment practices liability insurance (EPLI) boundaries increasingly overlap around the workplace helps organizations ensure they are equipped with the right trade association insurance to protect themselves.
The Reality of Employment Practices Liability
An increasing number of employees are filing lawsuits regarding employment practices. This is primarily the result of increased societal awareness, shifting legal standards, and a willingness among employees to stand up for themselves.
Trade associations often consider themselves utterly separate from private-sector workplace environments. But they are just as vulnerable to the same discrimination, harassment, and other employment-related allegations as corporations. Without trade association insurance in place to fund settlement payments and skyrocketing defense costs, associations put their financial health and membership relationships in jeopardy.
The Blurring Lines Between EPLI and D&O
The line between EPLI and D&O is blurring now that more claims are being filed. Therefore, trade associations dealing with lawsuits alleging wrongful workplace acts are discovering situations where both types of insurance are necessary:
Harassment Claims Increasingly Name Individuals
The culture surrounding workplace hostility and power imbalances is changing, and more employees are willing to stand up against leadership for the wrongs they suffer, whether real or perceived. And that means that harassment complaints now often cite responsible executives by name. State laws allow personal liability for harassment, even for actions taken while working, exposing directors and officers to million-dollar defense bills.
Discrimination Lawsuits Can Involve Decision-Makers
Similarly, claims asserting discrimination in hiring, pay, or terminations may allege individual accountability alongside organizational liability. While directors and officers justifiably maintain they acted within the scope of their duties, proving this still requires a strong and often expensive legal strategy.
Negligent Hiring/Supervision May Trigger D&O Risk
Plaintiffs’ attorneys know that inadequately screened new hires or lack of oversight that enables workplace problems will end up in the directors’ and officers’ laps. When employees successfully argue that negligent employment practices caused discrimination or harassment, directors and officers share the liability with the trade association.
Implications for Directors and Officers
As EPLI matters increasingly trigger D&O policies, directors and officers face even more significant risks:
Personal Liability Threats
Employment-related claims naming individual leaders pressure them to prove allegations fall outside their legal purview before dismissal. Until then, defending against lawsuits represents substantial personal liability for legal costs and potential damages.
Reputation Impact
In today’s polarized climate, plaintiffs publicize filed complaints to apply pressure, immediately harming executive reputations. With social media illustrations of workplace conflicts going viral overnight, even unproven accusations create lasting brand damage for associated decision-makers.
Trade Association Risk Management Techniques
Because EPLI and D&O-related risks around employment practices create major threats for trade associations, mitigating this exposure warrants a broad strategy encompassing the entire organization, including:
Insurance Policy Alignment
Meet with legal counsel and brokers to conduct annual EPLI and D&O coverage reviews, ensuring adequate limits, coordinated terms, and dedicated policy forms and correctly transferring organizational versus individual entity exposures.
Employment Policy Enhancements
Trade associations must follow best practices regarding crucial HR activities, from standardized hiring protocols and updated workplace expectations to non-discrimination protections and controlled termination processes.
Required Discrimination and Harassment Prevention Training
Another critical safeguard regulators increasingly mandate is reinforcing zero-tolerance stances through mandatory periodic training for directors, officers, managers, and employees.
Internal Transparency Initiatives
Executives who can cultivate organizational cultures that allow staff to surface complaints freely facilitate early-stage internal resolution, minimizing liability threats and associated reputational impacts.
Responding to EPLI Claims
While trade associations focus on mitigating the risks and reducing their exposure to liability for employment practices, that doesn’t mean employment-related claims are impossible. This is where coordinating a rapid response is essential:
Insurer Collaboration
Associations should work with insurers to provide timely claim notifications, documentation, and status updates. This allows the claim to be investigated effectively. It also means there’s sufficient time and resources to develop an effective defense strategy and determine a potential settlement, if applicable.
External Messaging
In the era of instant communications, public responses are only partially predictable, so associations still must prepare media statements expressing organizational values and commitments to uncovering the truth.
Crisis Management Preparation
For high-profile EPLI situations, media playbooks that designate internal/external response teams and outline communication protocols help associations control narratives.
Work with CI Solutions to Protect Your Trade Association from Employment Practices Liability
Trade associations can no longer ignore the reality that liability for employment practices represents a growing risk environment. The combination of financial loss and reputation damage from EPLI claims merging with D&O exposures makes a compelling case for securing specialized coverage and collaborating across organizational silos to instill proactive risk discipline.
CI Solutions can assist leaders wishing to safeguard their association’s future regarding liability for employment practices. Our team has extensive expertise in designing targeted insurance and risk management solutions for associations and nonprofits. Contact us today at 703.988.3665 or online to learn more about the trade association insurance policies that can safeguard your association and its leaders.