(photo credit: Ariel Jerozolimski)
Meretz Chair MK Zehava Gal-On petitioned the High Court of Justice on Sunday to prevent the AIG insurance company from selling an insurance policy that includes coverage for high-ranking corporate employees accused of sexual harassment.
AIG's Directors' Insurance plan offers coverage for a number of management-related liabilities, one of which is sexual harassment suits brought against the insurance holder.
Gal-On released a statement saying that the insurance policy conveys to the policyholders that the way is open for them to sexually harass their subordinates and thus encourages sexual harassment.
According to Gal-On, following a report about the plan released by Globes in September 2004, she had addressed complaints about the plan to AIG's corporate management in Israel, as well as to Attorney General Menahem Mazuz's office and to the Insurance Supervisor of the Finance Ministry. She said that she received no response from any of the parties, with the exception of Mazuz's office, who said that the matter was "being looked into."
In the petition, attorney Roi Keidar wrote that the "marketing of this policy without the intervention of the attorney general and the insurance supervisor is characterized by a lack of logic that opposes the public interest."
Keidar continued that legitimizing such a policy reduced the danger associated with committing sexual harassment, neutralizes [the law's] preventative force, and "neutralizes the law in terms of preventing sexual harassment."
Such policies are, however, not uncommon in the United States, where AIG is based. Termed Employment Practices Liability Insurance (EPLI), the policies protect businesses and particularly executives against allegations including discrimination, wrongful termination, failure to employ or promote, wrongful discipline, wrongful infliction of emotional stress, mismanagement of employee benefits - and sexual harassment.
The trend toward coverage against "employment practices" lawsuits began in the early 1990's, when sexual harassment was high on the public consciousness following high profile cases such as the Clarence Thomas hearings, in which the appointment of a US Supreme Court justice was almost halted following allegations of sexual harassment.
Such lawsuits have proven costly to US corporations. A 1998 verdict in Iowa awarded $80.7 million to a former United Parcel Service employee. In another case, the Michigan Supreme Court, overturned a $21 million verdict which would have otherwise been the largest recorded compensatory award for a single-plaintiff sexual harassment suit in United States history.
While EPLI policies once only provided for legal expense reimbursement, many now also provide indemnification for settlements and judgments, and the growing industry of EPLI coverage is now valued at $1.3 billion, according to industry estimates.
AIG Israel's CEO Hava Friedman-Shapira emphasized Sunday that the company's policy only covers the legal expenses prior to the delivery of the verdict and does not cover expenses accrued following a sexual harassment conviction.
"The policy does not cover - under any circumstances - people who will be convicted. The policy does not insure for any criminal conviction. If the person is guilty, the policy does not cover his ensuing expenses."
But Gal-On says that the message implied by such a policy is dangerous. "Only a sexist and chauvinistic world view would see that sexual harassment is part of a director's job or the field of activity of a company as implied in the insurance policy. Sexual harassment is not collateral damage and not negligence."