Key takeaways:
EPL underwriters have widened their focus beyond California, with nationwide scrutiny of state and local regulations, legal venues, compliance practices, and emerging risks becoming commonplace.
Social inflation, nuclear verdicts, and evolving litigation dynamics are contributing to growing claim severity and more challenging underwriting conditions in a growing list of states, counties, and cities.
Employers that can demonstrate strong compliance, governance, and workforce management practices may be better positioned for increasingly rigorous renewals.
Workplace litigation risks are becoming more complex, more costly, and more geographically diverse. While California remains a focal point for underwriters, growing concerns around pay transparency laws, biometric privacy, litigation trends, and plaintiff-friendly venues are expanding the list of jurisdictions receiving scrutiny.
As employment practices liability (EPL) insurance claim severity rises and regulatory requirements compound, employers face increasing pressure to demonstrate effective compliance, governance, and workforce management practices.
A more fragmented and complex risk environment
California has historically been the most challenging employment environment for U.S. employers, and it still claims a top spot among difficult jurisdictions for several reasons, including a plaintiff-friendly judiciary, outsized jury awards, and the state's Private Attorneys General Act (PAGA), which provides a private right of action for costly wage and hour claims.
But the Golden State is no longer the sole focus of EPL underwriters, who are increasingly scrutinizing a broader range of locales across the nation.
Illinois provides one example. In addition to typical employment liability concerns, employers operating in the state continue to navigate biometric privacy exposures under the Illinois Biometric Information Privacy Act (BIPA). The issue has become so costly and pervasive that many EPL insurers have responded with exclusions or more restrictive coverage approaches.
Other states are drawing attention for their plaintiffs’ bars’ aggressive use of novel employment regulations. Washington and Oregon, for example, are among the 19 states that have enacted pay transparency laws. As more jurisdictions adopt similar disclosure requirements and enact new legislation affording employees additional rights and protections, employers will face a growing patchwork of obligations that can create compliance challenges and increase litigation risk.
At the same time, employers must keep pace with an expanding range of state-level initiatives involving workplace technology and artificial intelligence. Just in the last year, Connecticut, California, and Maryland have each enacted or announced AI regulatory frameworks that introduce new obligations and challenges for employers. While the regulatory landscape remains fluid, these developments are creating additional areas of underwriting focus.
Hyperlocal considerations like venue also matter. In some cases, underwriters are less concerned with an entire state than with individual counties or cities within it.
Illinois again provides a good example: Cook County — home to Chicago — shares many of California’s pro-plaintiff and employee-friendly hallmarks but is also being watched by underwriters because of elevated Equal Employment Opportunity Commission (EEOC) litigation activity. An analysis by the law firm Duane Morris of EEOC-initiated litigation filings found that the agency’s Chicago district office led all offices with 14 filings (opens a new window) in fiscal year 2026, which ended Sept. 30.
Other specific venues under watch include New York City, Florida’s Miami Dade County, and Pennsylvania’s Philadelphia County.
More severe claims
The growing focus on challenging jurisdictions is occurring against a backdrop of rising defense costs and increasing claim severity.
Like other liability lines, EPL is feeling the effects of social inflation. Larger settlements and verdicts continue to capture headlines, while employers face growing defense costs and increasingly complex litigation. High-value employment-related settlements and judgments are becoming more visible across the country. And “nuclear verdicts" — jury awards of $10 million or more — are becoming more commonplace.
Since the start of 2025, juries have awarded several employment-related nuclear verdicts across the country not just in California, but in states such as Florida, Michigan, Oregon, and Colorado, including two “thermonuclear” awards of more than $100 million each and another nearly $80 million verdict. Employment suits in which nuclear verdicts have been awarded span allegations involving discrimination, harassment, retaliation, whistleblower claims, and wrongful termination.
Third-party litigation funding (TPLF) may be contributing to lengthier and more expensive employment-related litigation. While data remains limited, the practice is drawing heavy scrutiny from insurers and policymakers (opens a new window).
Regulatory activity provides another indication that employment risk is becoming more geographically diverse. Although some of the nation’s largest states, like Texas, Florida, Georgia, and California, will always lead on total EEOC charge filings, an analysis by Fairchild Employment Law found that some states not typically associated with elevated employment risk — including Alabama, Arkansas, and Mississippi — actually see greater filing activity on a per capita basis than their larger peers.
What employers should do now
The EPL market is becoming more challenging (opens a new window) as insurers respond to worsening claims performance with higher pricing, tighter underwriting, increased retentions, and greater scrutiny of high-risk industries and jurisdictions. While capacity remains available, most buyers should expect modest rate increases — and more rigorous underwriting reviews during upcoming renewals.
The days of relying solely on a "check the box” EPL application are fading. Underwriters increasingly want to understand not just where an employer operates, but how it manages employment-related risk in those locations. Employers with significant employee populations in jurisdictions receiving heightened scrutiny should be prepared to explain the steps they are taking to comply with local regulations, monitor legal developments, and address emerging exposures.
That preparation often requires a close partnership between risk management, human resources, legal counsel, and insurance advisors. Given the growing variation in state and local requirements, employers should consider whether they have access to legal guidance that reflects the nuances of the specific jurisdictions in which they operate. A one-size-fits-all approach is becoming increasingly difficult to sustain in the current environment.
Employers should also view EPL insurance as more than simply a risk transfer mechanism. While balance-sheet protection remains critical, many insurers also provide valuable risk management resources, including training materials, employment law updates, model employment policies and sample HR forms, legal advice hotlines, and other tools designed to help employers reduce the likelihood of claims in the first place. Employers should also evaluate wage and hour insurance, which can help address exposures involving employee classification, wage disputes, and related allegations that are typically excluded from EPL policies.
Obtaining the best outcomes at renewal increasingly depends on presenting a clear narrative around workforce management, compliance, governance, and risk mitigation. It also helps to work with an experienced insurance broker that combines knowledge of the EPL and wage and hour insurance marketplace with an understanding of the evolving legal and regulatory landscape.
As underwriters place greater emphasis on jurisdiction-specific exposures, employers can benefit from working with insurance brokers who can help articulate those efforts, navigate changing requirements, evaluate carrier capabilities, and assess insurers based on their claims track records and risk management resources.
For more information and insights, please visit Lockton’s EPL webpage here. (opens a new window)
