Most staffing agencies are familiar with general liability and professional liability insurance. These are table stakes – covering third-party bodily injury, property damage, or mistakes tied to professional services. But ask around about Directors & Officers (D&O) insurance or Employment Practices Liability (EPL), and the answers get fuzzier.
For many agency owners, D&O and EPL either feel like “big company” coverage – or are simply too expensive to justify. But here’s the problem: the risks these policies are designed to cover are already present inside most staffing firms, whether leadership realizes it or not.
This article breaks down what these coverages do, how they apply to staffing agencies, and why more agencies are starting to reassess their need for protection – especially as clients become more contractually demanding.
What Is D&O Insurance – and Why Might a Staffing Agency Need It?
D&O insurance protects your company’s leadership – owners, executives, board members, and directors – against claims of mismanagement, breach of duty, or financial harm tied to business decisions.
While this might sound like something only public companies or large corporations need, D&O risk exists any time someone can accuse your leadership of:
- Mishandling company finances
- Breaching a contract
- Failing to act in the company’s best interest
- Violating employment or privacy laws
- Making a strategic decision that harmed a stakeholder
Staffing firms often overlook D&O because they don’t have outside investors. But lawsuits can still arise from former business partners, clients, creditors, or even employees who feel they were treated unfairly during a termination, buyout, or contract dispute.
In some cases, plaintiffs may name both the company and individual directors in a lawsuit. Without D&O coverage, defending those individuals could come out of their personal assets.
What Is EPL (Employment Practices Liability)?
EPL covers claims brought by employees (or job applicants) alleging discrimination, harassment, wrongful termination, retaliation, failure to hire/promote, or similar employment-related issues.
For staffing firms, this risk is twofold:
- Internal risk: Your own employees – recruiters, admin staff, managers – can bring claims against the company.
- Client-driven risk: Some clients may try to push EPL-related liability back onto the staffing firm, especially in joint employment scenarios.
It’s worth noting that EPL is often offered as an add-on to D&O, but it’s frequently declined due to cost. That can be a costly decision later.
Why EPL Coverage Is Becoming More Relevant
Historically, only a small percentage of staffing agencies carried EPL. But that’s starting to change – particularly as larger clients include EPL requirements in their contracts.
Why are clients asking for it?
If a harassment or discrimination lawsuit is filed involving a placed worker, the client may be named in the lawsuit – even if the alleged conduct occurred within the staffing agency’s oversight. But if the staffing firm has an EPL policy, the client can push some of the liability back by naming the agency and accessing their insurance limits.
This requirement isn’t universal – but it’s becoming more common in larger contracts. For agencies competing for national accounts or government work, not having EPL may become a dealbreaker.
What Happens If You Don’t Carry D&O or EPL?
You’re not necessarily out of compliance – but you are taking on 100% of the legal and financial burden if a claim is made. And these claims don’t need to be large to be disruptive.
For example:
- An internal wrongful dismissal claim could easily cost five figures in legal fees alone.
- A claim of misrepresentation during a business sale or merger could be personally devastating to owners or directors.
- A client-side demand to be named as additional insured on EPL could expose your firm if you can’t comply.
In short: without D&O or EPL, you’re self-insuring exposures that are often unpredictable, reputationally damaging, and expensive to defend – even if the claim is groundless.
A Note on Cost
D&O and EPL coverage for staffing firms is typically not as expensive as owners assume. While premiums vary based on size, structure, and claims history, these policies are often more affordable when bundled as part of a broader management liability package – especially when reviewed proactively, rather than at the last minute.
What’s more expensive?
Trying to respond to a lawsuit without coverage in place.
Final Thought: It’s Not About Company Size – It’s About Liability
Whether you’re placing five people a week or five hundred, the liability doesn’t scale linearly. If you’re hiring, firing, managing staff, or signing client contracts, you already carry the exposures these policies are built to protect against.
D&O and EPL aren’t about pessimism or fear – they’re tools for protecting the leadership, momentum, and reputation you’ve worked hard to build.
If you’re not sure where your current coverage stands, or whether these policies make sense for your agency, we’re happy to take a look.
Share post:
Danielle Wolff
Account Executive, Professional & Financial Services
I’m Danielle Wolff, an Account Executive at Axis Insurance, specializing in professional liability. My role centers around helping clients in professional services manage the unique risks of their industries, from health care and life sciences to real estate, lawyers, architecture, and engineering. With a bachelor’s degree and an MA from Wilfrid Laurier University, along with my Canadian Accredited Insurance Broker designation, I bring a solid foundation to every client interaction.
AUTHOR BIOGRAPHY