With rising numbers of sexual misconduct allegations and increased awareness of gender pay inequality across all areas of business, media and political life, insurers can expect increased exposure linked to sexual discrimination and harassment claims and class actions in 2019.

Claims of this nature may give rise to a wide range of exposures for directors and officers (D&Os) and, the extent to which insurers will be liable to indemnify insured organisations and/or their D&Os in respect of these claims will depend upon the breadth of the cover purchased by the company.

D&O liability insurance may cover some sexual misconduct-related claims, in particular linked to employment practices liability (EPL) against D&Os, which fall under broad management liability cover or, under a specific EPL extension (often sub-limited) and these policies could provide some cover to both the company and its D&Os. Such an extension would typically cover EPL claims (subject to any relevant exclusions, e.g. for bodily injury or conduct) based on acts, errors or omissions occurring in the course and scope of the insured persons' employment. However, this clause presents obstacles if the alleged misconduct occurs outside of working hours.

Topshop boss, Sir Philip Green's story shows the potential reputational damage that can be caused by misconduct allegations. Insurers may receive requests to indemnify public relations costs to minimise this kind of reputation damage, if a company has purchased entity "crisis management" cover. In addition, side C cover (cover for the entity) might respond to a US securities claim alleging a fall in share price as a result of negative publicity following a sexual misconduct scandal involving a D&O. However, "insured vs insured" exclusions might preclude cover for claims made by employees against a D&O and/or the entity. Insurers need to prepare for these potential claims.

You can read the rest of our insurance predictions here.