As employers across the United States face heightened scrutiny of diversity, equity, and inclusion (DEI) policies, the risk landscape around employment practices liability (EPL) is shifting.
Allyson Benda, ExecPro Broker at CRC Group, says the environment is increasingly complex for organizations navigating both legal and regulatory changes.
“DEI is no longer just a matter of internal policy or branding. It’s a focal point for legal challenges and EPL claims,” Benda says. She points to changes in federal and state policy, as well as increased attention from the Equal Employment Opportunity Commission (EEOC) and investor groups, as drivers of new exposures for employers.
“Shifts in federal and state policy and heightened attention from the EEOC and investor groups are creating EPL exposure, whether an organization scales back DEI initiatives or maintains them,” she says.
Benda describes the situation as a double-edged sword. “Employers are finding themselves in a challenging position: reducing DEI programming can lead to claims of discrimination or retaliation, while continuing such efforts may expose them to accusations of reverse discrimination or shareholder litigation.”
Navigating these risks requires a clear understanding of how organizational decisions regarding DEI programs can impact EPL insurance coverage, making it vital for employers to align their policy choices with their risk management strategies.
Federal and state governments have begun to roll back DEI-related mandates, particularly in education and government. “These efforts include restrictions on DEI training, defunding of related offices, and reversals of affirmative action precedent. Some states are following suit, passing laws or executive actions restricting race-based initiatives and requiring compliance reviews,” Benda says.
The Department of Justice has established a task force to examine potential civil rights violations among federal funding recipients, adding a layer of unpredictability for organizations. This has resulted in a climate where employers must weigh their internal DEI goals against an evolving and uncertain legal framework.
The legal risks for employers are coming from multiple directions. “Employers that reduce or eliminate DEI programs may face claims from employees who allege a hostile work environment or diminished support for protected groups. Retaliation claims tied to previous DEI activity are also a potential outcome,” Benda says.
At the same time, organizations that choose to maintain or expand DEI initiatives may encounter legal challenges from individuals who believe they have been unfairly treated, often described as reverse discrimination claims.
Benda points to a rise in Section 1981 claims under the Civil Rights Act, particularly when DEI programs are perceived to exclude individuals based on race or other protected characteristics.
“The recent Students for Fair Admissions case has prompted broader scrutiny of race-based scholarships and hiring programs in the education sector. In the private sector, shareholder lawsuits are also rising, with investors alleging that companies have misrepresented or mishandled the financial impact of their DEI strategies,” Benda says.
This combination of legal and regulatory pressure has created a volatile environment for employers.
“This combination of pressures creates a volatile environment where legal defensibility is uncertain, especially given inconsistent guidelines across jurisdictions. Employers are facing risk from both directions. There’s exposure whether you’re scaling back on DEI or continuing those initiatives,” Benda says.
Insurance carriers have not yet made sweeping changes in response to these emerging exposures, but Benda advises caution.
“Agents and insureds should be vigilant. Policies should be reviewed for how they define ‘wrongful acts,’ ensuring coverage includes a wide range of employment-related claims such as discrimination, retaliation, and negligent hiring or promotion practices,” she says.
With that in mind, Benda recommends verifying whether policies include third-party coverage, which protects against claims made by job applicants, vendors, or clients, not just employees. “Employers using outdated EPLI forms or relying on a general liability rider may lack this essential protection.”
Benda also highlights the importance of understanding policy exclusions. “Agents should also be aware of potential exclusions related to government investigations, regulatory actions, or intentional conduct. Some class-action and EEOC claims may be subject to sublimits, and EPL exclusions in D&O policies may limit protection from related shareholder lawsuits.”
She sees a clear role for retail agents in helping clients adapt, highlighting how retail agents can help clients navigate this landscape.
“Employers should assess which programs are in place, how those initiatives are defined, and whether legal counsel has reviewed them in light of current anti-discrimination laws,” she says.
Leadership teams should be trained to implement company policies in a way that is both objective and legally compliant. It is also important for employers to keep a record of the reasoning behind any changes to DEI initiatives, and to ensure that employment decisions such as hiring, compensation, and promotions are based on transparent, merit-based standards.
“DEI policy shifts are creating new EPL exposures across the board. Whether a company is scaling back, reassessing, or doubling down on its diversity initiatives, liability is no longer a one-sided concern,” she says.
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