The $1,000,000 DEI Insurance Problem

For International Women's Day I sat down with Kit Chaskin and Lauren Golanty from Third to First for a conversation on the Inclusionism podcast about a novel insurance solution to an work place conflict problem that we have quietly lived with for decades: learn how we disincentivize workplace conflict.

At first the discussion sounded like a conversation about HR systems. But the more we talked, the clearer it became that the real issue is much deeper than HR.

It is about how the insurance system itself is structured.

And once you see the structure, it becomes obvious why so many workplace problems end up costing companies hundreds of thousands—or even millions—of dollars.

Because the system is built to respond after the damage is done.

Most workplace lawsuits do not begin dramatically. They begin with moments that seem small at the time. An employee raises a concern. A manager brushes it aside. HR logs the complaint but decides the issue does not require escalation.

Weeks pass. Sometimes months.

Then a lawyer’s letter arrives.

By the time that happens, the problem has already become expensive.

To understand why, it helps to understand one of the most basic concepts in insurance: the difference between first parties, second parties, and third parties .

In any insurance policy, the first party is the one who buys the coverage. In Employment Practices Liability Insurance—often called EPLI—that first party is the employer.

The second party is the insurance company providing the coverage.

The third party is someone who claims they were harmed. In workplace liability cases, that third party is typically an employee alleging discrimination, harassment, retaliation, or wrongful termination.

EPLI is designed as third-party liability insurance . That means the policy activates only when the third party—the employee—files a legal claim against the first party—the employer.

In other words, the insurance system only turns on once the workplace conflict becomes a legal dispute.

Which is precisely the moment when the problem has become the most expensive.

Most executives think employment lawsuits are rare events. But insurers know something different. Across large workforces, employment complaints are statistically predictable.

Insurance underwriters often estimate that roughly half a percent to one percent of employees will file some form of workplace complaint each year . It sounds like a small number until you apply it to a real company.

A firm with 1,000 employees can expect somewhere around five to ten complaints annually . A company with 5,000 employees might see twenty-five to fifty complaints each year . For organizations employing 10,000 people or more, the number can exceed fifty or even a hundred workplace complaints in a single year .

Most of those issues never become lawsuits. Many are resolved internally, and some move through regulatory channels like the EEOC, which receives roughly 70,000 employment discrimination charges every year in the United States . That was before Trump destroyed the agency.

But a small percentage escalate.

And when they do, the cost curve changes dramatically.

Legal defense costs alone often exceed $200,000 , even when the company ultimately wins the case. Settlements frequently average between $75,000 and $125,000 , while jury verdicts can climb into the $500,000 to $1 million range.

Large verdicts—sometimes called “nuclear verdicts”—can exceed $5 million , and occasionally much more.