First single insurance program providing $100 million protection against job discrimination, sexual harassment, other employee litigation announced.

HAMILTON, Bermuda--(BUSINESS WIRE)--March 21, 1996--Marsh & McLennan Global Broking (Bermuda) Ltd. and X.L. Insurance Co. Ltd. (XL) today announced development of first single, stand-alone insurance program offering employers up to $100 million in protection against the soaring cost of claims resulting from employee lawsuits.

The policy provides world-wide coverage of claims alleging such offenses as job discrimination, sexual harassment, and wrongful dismissal. Marsh & McLennan initiated the program and developed it with XL and Zurich American Insurance Group. XL will write the policy - termed "broad form" for its wide breadth of coverage - and will consider applications for coverage through licensed Bermuda brokers. Zurich American and A.C.E. Insurance Co. Ltd. of Bermuda will act as reinsurers

Besides high limits, the program offers employers one-stop-shopping, permits them to conduct their own defense, and covers punitive damages, which are excluded under similar current insurance policies. The policy also has a batch clause, which means its typical $5 million self-insurance retention level has to be met only once when multiple employee claims stem from a common cause. In addition, providing the coverage through a single policy will eliminate disputes over the payment of claims and simplify the application and claims processes.

Until now, employers have had to arrange their protection against employee lawsuits through a combination of policies - general liability, directors-and-officers liability, fiduciary liability, and perhaps several stand-alone employment practices liability policies with relatively low limits of coverage. This overlapping coverage, cobble together among many insurers using numerous forms and multiple claims filing and settlement processes, has led to complexity and disputes in dealing with employee legal claims.

Another significant problem is that payment of employment practices liability claims under D&O, general liability, and other policies absorbs financial capacity needed to provide protection against non-employee-related legal exposures under those coverages.

Marsh & McLennan initiated development of the new program after consulting with some 200 major employers about their requirements for protection against legal action brought by employees. The XL coverage evolved after extensive discussions with the worldwide insurance marketplace, said Gary D. Gatewood, Managing Director responsible for March & McLennan Global Broking.

He added that, as a result of those discussions, additional employment practices liability policies similar to the one announced today are expected to be offered by other underwriters.

"This program fundamentally changes the insurance marketplace and delivers new, effective solutions to major employers at a time when it is badly needed," Gatewood said. "The revolutionary changes taking place in the workplace could make employment practices liability as much of an insurance issue in the coming millennium as environmental liabilities have been in the latter part of this century."

James J. Ansaldi, Senior Vice President of XL, noted that the new program responds to a growing need of large employers.

"Business and professional organizations are facing escalating employee-related claims due to such factors as downsizing initiatives and greater sensitivity to issues such as sexual harassment and treatment of the disabled. We have already seen employee-related class-action awards in excess of $100 million against a single employer and the direction of employer-employee relations suggests this trend will gather momentum in the future," he said.

The new coverage is designed principally to protect employers against catastrophe-level claims resulting from class-action and large individual lawsuits. It covers awards arising from allegations of failure to provide equal opportunity of employment, discrimination, sexual or other harassment, wrongful termination, retaliation against employees, and invasion of privacy.

"These provisions cover all the categories in which we have seen major claims awards in employee litigation," Gatewood said. Excluded under the policy are workers compensation and the other claims normally excluded under most existing employment practices liability policies.

XL and Marsh & McLennan summarized the policy's key provisions:

o It has a limit of $100 million and a typical risk-retention level of $5 million. o It broadly defines the loss amount to include punitive, exemplary, multiplied and other damages. o It is an indemnity contract, which allows clients to retain control of defending claims. o It has a batch, or aggregation clause, which means the $5 million retention level has to be met only once when multiple employee claims stem from a common cause. o Coverage is worldwide.

XL, Marsh & McLennan, ACE, and Zurich American noted they are confident that the new policy's provisions will meet a major need of large employers. Zurich American is a leading underwriter of current employment practices liability coverages.

CONTACT: Marsh & McLennan

Fiona Luck, 809/295-3454

or

XL

Gavin Arton, 809/292-8515