Claims your union clients may face — and how much they’ll cost you

Class actions against unions present unique insurance risks.

For example, a union’s executives may have to choose between its employer and its employees thanks to the duty of fair representation, observes a specialty insurer. 

“We’ve had a few fairly large gender-based discrimination and harassment class actions against employers that have also named the union,” says Marianne Goodfellow, assistant vice president at Markel. “And that’s the other piece of this — you typically get the suit against both the employer and the union.”  

This can create difficulties for the union, which has the duty of fair representation for all employees as per their collective agreement. 

“You will have that sort of [debate], ‘Do I align with the employer? Do I align on my own? And how do I protect my members?’ That duty of fair representation is important because you need to protect all members fairly and without bias.”  

Lawsuits against unions commonly fall under the employment practice liability umbrella, said Goodfellow. Insurance coverage is also available to protect a union executive against allegations of negligence or inappropriate conduct.  

In one gender-based discrimination class action, Markel ended up paying “close to $400,000 in defense and settlement,” when a union was taken to court for an employment practices lawsuit. 

“The union was alleged to have failed to fulfill both their statutory and a common law duty to ensure a workplace free of discrimination,” Goodfellow said. “Then they [also allegedly] failed to properly process and investigate and resolve the grievances of the union members. In this particular case, they actually had a harassment and discrimination procedure within the collective bargaining agreement.” 

A class action of this caliber can tend to be a significant payout, given the number of employees that would be involved. “But in this particular case, it wasn’t a huge class of employees,” said Goodfellow. 

In another case Markel dealt with, the union was alleged to have breached their duty of fair representation during a workplace grievance, ultimately leading to a lawsuit. 

“The union was alleged to have acted in bad faith, grossly negligent, in handling a discrimination dispute and the grievance process,” said Goodfellow. “The matter was deemed to be abandoned by the employer because of the fact they mishandled the grievance process, and we ended up paying out over $380,000 both in defense and settlement.”  

In another example, the union filed a grievance when a contract was breached by an employee of the union.  

“The union policy actually covers the employment practices of their own employees, but then it also brings in the member’s exposure as well,” said Goodfellow. “In this particular case, it was an employment practice [action in which there was] a breach of the employment contract with their own employees, and we paid over $100,000 to defend that one.” 

Other common risks unions are exposed to include:  

• Wrongful terminations, in which a union member or employee may allege their termination was a breach of the duty of fair representation.  
• Defamation of character. 

When it comes to finding coverage for unions, brokers may place unions under the not-for-profit coverage umbrella because they are tax-exempt organizations. However, at times, policies for unions exclude one of the most crucial parts of a union’s duty — collective bargaining. 

“Some markets out there will consider making adjustments to the policy form, and others just say, ‘No, we cannot write this without a collective bargaining exclusion.’ Which the whole point of the coverage is to protect against that breach of contract,” said Goodfellow.  

Feature image by iStock.com/putilich