PLUS panel: EPL insurers and employers are caught in DEI crossfire amid Trump executive orders

By Isha Marathe

March 3 - (The Insurer) - An uptick in 'reverse racism' cases, a federal crackdown on private sector diversity, equity and inclusion (DEI) initiatives and the threat of nuclear verdicts have supercharged employment practices liability (EPL) insurance risks in ways that underwriters and lawyers are struggling to keep up with.

The speed at which these changes have come about, which upend the long-term corporate strategy of tracking the workforce by race, sexuality and gender to maintain certain levels of diversity, has caused clashes between companies and their shareholders, spurred litigation and created uncertainty for EPL insurers who are playing whack-a-mole with overlapping interests.

These cultural, administrative and legislative shifts are likely to lay the groundwork for long-term changes in the type and volume of EPL claims in the pipeline as companies scramble to comply with a vague set of new rules, said a panel of insurers and employment attorneys at the 2025 PLUS Symposium Series on Employment Liability Insurance.

THE DEI BALANCE

Since his inauguration on January 20, President Donald Trump has rolled out a handful of executive orders aimed at ending DEI programs, which are a set of organisational frameworks that were created to promote fair treatment and full participation of all people by correcting discriminatory policies or practices within an entity.

Trump's efforts at curbing DEI first targeted the federal government, with a February ban on "gender-identifying pronouns" in signature blocks for all email addresses ending with .gov. Then, investigations into DEI programs extended to contractors, federal grant recipients and, eventually, the private sector, deeming certain programs “illegal," "immoral" and "discriminatory."

In early February, Trump appointed Andrea Lucas as acting chair of the Equal Employment Opportunity Commission (EEOC) and fired two Democratic commissioners, intending to roll back the agency's guidance on gender-based harassment, according to his January 21 executive order.

In response, companies like Disney, Paramount Global, Warner Bros. Discovery, Goldman Sachs, BlackRock, Citigroup, Pepsi and several others, sent out staff memos watering down terminology or rolling back on "aspirational" diversity "targets".

Others, like Costco, Apple, Coca-Cola and JPMorgan Chase have stood by their programs, often with support or encouragement from their shareholders.

But for insurers, both ends of the spectrum create potential risks. Largely because many companies are not yet sure what constitutes "illegal" DEI, said Joseph Coppola, assistant vice president in The Hartford's EPL practice.

"As we are sitting here, things are changing," he said.

For instance, while a Maryland court blocked key aspects of Trump's anti-DEI executive orders, the injunction did not enjoin Attorney General Pam Bondi from compiling a list of companies that might be running unlawful DEI under the White House's orders, Coppola pointed out as an example of regulatory uncertainty for the private sector.

"Employers and insurers are in a very difficult position trying to make sense of all this," Coppola said. "Because, what is (the definition) of unlawful DEI?"

Some things are clear no-nos, he pointed out, like "no quotas" measuring race, gender, sex or sexual orientation-based targets, "no racial balancing of the workforce," and no to using these criteria for promotions or evaluations.

But when it comes to anti-bias training, equal opportunity employment or "discrimination on both sides," meaning against the minority and majority, "that's probably OK," he said.

Essentially, insurers have to push their clients to consult with their legal counsel to redo their DEI policies for the new future, he said.

Joe Kelly, national practice leader for Sompo’s employment, ERISA and fidelity products, warned that state laws differ from federal laws, and progressive attorneys general might view certain DEI rollbacks as discriminatory. Additionally, Trump's drastic efforts at curbing these policies might flip over to the other side with the next presidential administration, so he cautioned against tossing DEI efforts that companies had spent decades taking on.

Between a plaintiffs bar eager to go after DEI programs and file discrimination claims, "it's going to be a very challenging environment (in 2025) and beyond" for corporations, "(but) that doesn't mean (they) should wipe out (their) DEI program by any means," he said.

"It just means you need to be very thoughtful about your (DEI) program. You need constant audits done to (ensure) that it's not overreaching – (that) there are no quotas in your executive reviews and manager reviews, you have to make sure you're not asking them what they've done to staff in certain underserved areas... that kind of criteria for promotions evaluations is now of out the door."

NEW CLAIM ENVIRONMENT

The key struggle for EPL underwriters at this time is that for most anti-DEI efforts from the federal government, the repercussions are unclear and uncertain.

So, the risk from an EPL context is also uncertain, Kelly noted.

"[But] this is not going to slow down," Kelly said. "Discrimination claims are not going away," and are likely to spike, and importantly, "you need to tailor your training for 'reverse discrimination' (because) that's a new frontier out there."

Reverse discrimination, a term used to describe discrimination against members of a dominant or majority group in favour of members of a minority or historically disadvantaged group, is likely gaining steam, the panel noted.

Meredith Cavallaro, partner at Paduano & Weintraub and leader of the firm's employment practice, underscored the significance of the oral arguments in the case of Marlean Ames, a heterosexual woman who contended that she lost out on a promotion that she wanted, and then was demoted in favour of two gay employees.

While the U.S. Court of Appeals for the Sixth Circuit threw out Ames’s sexual orientation claim, the U.S. Supreme Court heard the case on February 26. In its decision, SCOTUS is poised to clarify the legal standard of "reverse racism."

"What we're seeing is a few (more) reverse racism cases come through our book of business," Kelly said. "We don't know yet if (the Ames case) is a signal flare of something much larger, but it seems like now there's some case law building, and there's definitely a cultural shift in that direction."

Which way the Ames case falls may be a deciding factor for companies who are on the fence around DEI rollback, Cavallaro at Paduano & Weintraub said.

For companies that might still choose to take on litigation from the DOJ, individuals or plaintiffs on either side of the DEI battle - they are opening themselves up to an aggressive and vulnerable discovery, The Hartford's Coppola said.

"In today's world being so polarized, going to a jury is a real crap-shoot," Coppola said, raising caution about escalating social inflation.

"If you have Trump supporters on the jury, that's good for the defense. And then in some of the big blue states, California, New Jersey, New York, you know, a jury can slam you... So an employer taking DEI cases to trial is really, really (taking) a risk, and the plaintiffs bar knows that."