This Week In Risk Management — August Issue #2

The water cooler is buzzing with new and alarming risk management stories headlining this week. From sexual misconduct allegations to COVID-19 lawsuits to SEC-approved requirements regarding diversity, we’re hearing a lot of chatter reminding us how vital the right coverage is. And these hot topics are only the beginning. Here’s what’s happening in the risk management sector.

Hostile Work Environment Allegations Leads to a $90M Settlement

Most of us know L Brands from its subsidiaries, including Victoria’s Secret and Bath & Body Works. However, we didn’t realize that many individuals were eager to file lawsuits against the retail holding company, alleging sexual misconduct and hostile work environments. The news-breaking derivative suit in May 2020 opened our eyes.

Amid a series of scandals, many thought its reputation was marred forever — and it still could be. Time will tell. But one interesting nugget is where L Brands must dedicate the $90 million settlement. This detail only drives home the importance of management and governance measures at work in businesses.

For example, instead of merely paying a fine or penalty, L Brands has agreed to use that capital to fund an updated series of measures to improve its workplace. Additional training, investigative processes, and a diversity council are only a handful of initiatives on the agenda. It sounds like a lot of catch-up work! We imagine those execs are likely kicking themselves for not implementing these processes from the get-go.

McDonald’s Caught in the Middle of a Workers’ COVID-19 Lawsuit

Do you think dog diapers and coffee filters work well as face masks? Well, employees of the golden arches didn’t think so, either. After filing a 2020 lawsuit alleging McDonald’s managers gave these insufficient products for their employees to use, the franchise denied the allegations — as they’ve done throughout the pandemic.

Even though McDonald’s vowed to improve workplace safety and make their stores “as safe as possible,” the situation has opened a can of worms. Could this suit be a precedent for future claims of unsafe working conditions?

Sexual Misconduct Allegations Catapult the #MeToo Movement

In the wake of the #MeToo movement, sexual misconduct allegations have frequently led to costly D&O litigation. Some individuals thought these risks would wane as the movement evolved — but Activision Blizzard’s has proven them wrong.

The California DFEH filed a claim against the gaming company alleging gender-based employment discrimination, unequal pay, and a “pervasive frat-boy culture.” Blizzard denied the allegations initially but later apologized for its “tone deaf” response. Unsurprisingly, the situation has resulted in a massive shakeup for Blizzard’s management team.

To sum up, sexual misconduct and discrimination are continual problems in the workplace. The blatant disregard or indifference of these critical issues won’t outlast the movement. It’s not a matter of if these sorts of allegations will lead to D&O suits; it’s when.

Corporate Board Diversity Takes Precedence with the SEC

Nasdaq Inc. recently submitted a proposal that listed companies must have diverse boards or explain why they don’t — and the SEC approved it. While some lawmakers and companies have criticized the proposal, others take the “it’s about time” approach. Opposers claim that the proposal would interfere with boards’ duties to shareholders and could cost companies significantly.

With board diversity at the helm of transformation, Nasdaq will hopefully understand its listed companies’ approach to the issue better. But the idea of holding companies accountable is undeniably being shifted into hyperdrive. So, we wonder what kind of legal backlash we’ll see from these emerging changes? Will the frequency of D&O litigation increase even more in the next several years, or will it hold steady?

Hackers Return Nearly Half of the Stolen Cryptocurrency

Cryptocurrency hackers exploited Poly Network and initially stole over $600 million. In an odd turn of events, the same criminals returned nearly half of the stolen money. Although it was pegged as one of the largest thefts ever, it proves a valuable point: stealing cryptocurrency might seem effortless, but cashing out undetected is nearly impossible.

The notion of hackers, crypto, and all things cyber are scorching hot topics right now; however, we’re unsure of the specific insurance involvement in the Poly Network case. Undoubtedly, this will raise issues about cyber liability coverage, including what’s covered and what’s not regarding cybercrime and the returning of funds. Consider the financial damage companies must clean up, even when the cryptocurrency is returned. Merely giving money back doesn’t wipe the slate clean, after all.

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