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Insurers traditionally have not covered large employers' wage-and-hour litigation risks, but that is beginning to change.
The Bermuda operations of three insurers have begun offering stand-alone coverage of the risk, including XL Group P.L.C., Allied World Assurance Co. and Markel Corp.
XL's policy offers up to $25 million in limits on a primary or excess basis, said Matthew Irvine, chief underwriting officer of XL's Bermuda professional lines unit.
In addition, a proprietary wage-and-hour program developed in 2012 by Aon Risk Solutions offers up to $75 million of stand-alone coverage on a line slip/quota share or on a traditional layered basis through a group of insurers. A line slip quota share involves a group of insurers that agree on a shared percentage of the risks.
Phil Norton, Chicago based president of Arthur J. Gallagher & Co.'s D&O professional liability division, said working with the three insurers and adding $45 million in excess capacity can result in as much as $100 million in capacity in the Bermuda market.
Wayne Imrie, London-based management liability underwriter at Beazley P.L.C., which participates in the Aon program, said the employer takeup rate for wage-and-hour coverage has been disappointing so far, as it represents additional costs that need to be planned for 12-18 months in advance, but he anticipates it will gain in popularity.
Rodger Laurite, senior vice president and unit manager at Lockton Cos. L.L.C.'s financial services practice in Atlanta, said there are a handful of U.S. insurers that will offer wage-and-hour litigation coverage to smaller employers, generally those with up to 1,000 employees, and some sublimit of defense costs coverage, typically under an employment practices liability policy.
Companies face more stringent enforcement of laws that target corporate wrongdoing, ranging from the Dodd-Frank Wall Street Reform and Consumer Protection Act to the Foreign Corrupt Practices Act, as well as new regulatory tools — including one dubbed RoboCop.