How DEI policies are raising awareness and can help to mitigate EPL claims

Diversity, equity and inclusion initiatives are helping to address discrimination and bias, while aiding companies’ efforts to mitigate the impact of EPL claims.

The rising trend for claims against employment practices liability (EPL) insurance policies has continued this year, with multiple jurisdictions experiencing increased frequency of court filings and/or severity of claims.

According to US Equal Employment Opportunity Commission’s figures for the fiscal year 2023 (published on 29 September), 143 new employment discrimination lawsuits were filed– a more than 20% increase on 2022 filings. We anticipate this trend will continue into 2024.

Canada is similarly seeing an uptick in filings related to employment issues and we expect to see more decisions coming out of Canadian courts related to EPL risks this year, in particular, filings that reference microaggressions in the workplace.

In the UK, on the other hand, official statistics published by HM Courts & Tribunal Service show a decrease in the total number of employment tribunal discrimination claims (from around 34,000 in 20/21 to 19,000 in 22/23) but a 15% increase in average discrimination awards from £149,101 in 21/22 to £171,277 in 2022/2023.

However, with an ever-increasing focus on diversity, equity and inclusion (DEI) issues, organisations are trying to address their exposure to litigation risk through the implementation and updating of DEI policies, employee training and carrying out deeper reviews and campaigns around DEI issues.

It is important for individuals in the workplace to feel more comfortable about voicing their concerns about any issues that they face or perceive, to enable them to be addressed. DEI policies, together with other action in this area, are increasingly important as a means of reducing EPL claims and mitigating any potential impact of issues or resultant filings.

Looking forward, our experience suggests the increasing use of AI in employment practices worldwide – whether in recruitment, performance reviews, et cetera – may give rise to more issues, where the use of AI tools perpetuates existing bias embedded in employment processes.

When structuring EPL policies, insurers should therefore consider advising on possible mitigation strategies to avoid and/or address discriminatory behaviour – such as training for employees or in-depth review of third-party AI tools used in HR processes – as well as indemnity clauses to protect insureds from liability in the case of AI-related biases.