A Triple Threat for Staffing Agencies

July 1, 2025

Staffing agencies play a critical role in today’s evolving workforce landscape, connecting businesses with flexible labor across a wide range of industries. But this model also exposes agencies to a complex set of liability risks, especially as the demand for temporary and remote workers grows. Among the most pressing concerns are the increased exposure to commercial auto liability, a broader scope of employment practices claims, and heightened vulnerability to crime and cyber threats. Understanding and mitigating the “triple threat” these risks represent is essential to protecting staffing firms’ financial health and reputation.

To learn more about insurance solutions for staffing agencies and Professional Employer Organizations (PEOs), visit our Staffing and PEO Services page.

Three Looming Risks

As introduced above, three primary risks serve to add complexity to the staffing industry. Understanding these risks can help agencies develop risk management solutions to supplement the financial protection of professional and employment liability insurance.

1. Commercial Auto Risk

As staffing agencies increasingly supply workers for driving-intensive roles such as delivery, transportation, and mobile services, they face growing exposure to commercial auto liabilities. Accidents involving agency-placed drivers can raise complex questions about insurance coverage, especially when policies contain exclusions for certain vehicle types or driving circumstances. With claim costs rising industry-wide, agencies must take proactive steps to ensure adequate protection. Key risk factors include:

• Temporary employees may operate client or personal vehicles during assignments, leading to coverage ambiguities.
• Agencies may be held liable if accidents occur and the driver’s insurance is insufficient or non-existent.
• Increased accident severity and legal judgments are driving up commercial auto insurance premiums.
• Gaps in non-owned and hired auto coverage can leave agencies financially exposed.

2. Employment Practices Liability (EPLI)

Staffing agencies face heightened employment practices risks due to the diverse and often short-term nature of their placements. Legal claims now extend beyond traditional discrimination and harassment to include a range of evolving issues such as remote work disputes, mental health concerns, political expression, and appearance-based bias. Because staffing firms are typically named as co-employers, they can be directly targeted in lawsuits—even for conduct that occurs on a client’s premises. Emerging challenges include:

• Claims involving alleged discrimination based on race, gender identity, disability, or personal expression.
• Legal exposure from incidents that happen at client job sites but implicate the staffing firm.
• Risk of lawsuits related to remote work arrangements and work-from-home injuries.
• Increased need for comprehensive EPLI coverage and training to manage co-employment risks.

3. Crime and Cyber Risk

The rotating nature of temporary placements and the varying levels of access granted to contract workers create vulnerabilities to both physical theft and cyber incidents. Staffing agencies may be liable for losses resulting from employee theft, payroll fraud, or the mishandling of sensitive client or employee data. In a digital landscape where cyberattacks are increasingly sophisticated, temporary workers with insufficient security training can become easy targets—or unintentional conduits—for data breaches. Primary risk drivers include:

• Temporary workers in retail, warehouse, or clerical roles may be involved in inventory theft or document misuse.
• Ghost employees and timecard fraud can lead to financial losses if internal controls are weak.
• Exposure to client networks and systems without proper cyber hygiene increases breach risk.
• Many staffing firms lack sufficient crime or cyber insurance to recover from significant losses.

Professional and General Liability Coverage for Staffing Agencies and PEOs

Staffing agencies and PEOs face unique liability exposures that require tailored insurance solutions.

Professional Liability Insurance: Often called errors and omissions (E&O) coverage, it protects against claims arising from negligence, misrepresentation, or failure to perform professional duties. This is critical when a placed worker is accused of making costly mistakes or failing to meet a client’s expectations.

General Liability Insurance: Covers bodily injury, property damage, and personal injury claims that may arise from the day-to-day operations of the agency or its temporary staff while on assignment.

These policies are essential not only for financial protection but also for meeting client contract requirements. However, coverage needs can vary widely depending on the industries served, the roles filled, and the geographic footprint of the agency. That’s why it’s crucial to work with an experienced insurance broker or underwriter who understands the complexities of staffing and PEO operations. These professionals can help identify coverage gaps, structure appropriate limits, and ensure that endorsements and exclusions are properly tailored—ultimately reducing the risk of costly disputes or uncovered claims.

Staffing agencies operate in a fast-moving, high-demand environment—but with that agility comes significant risk. As commercial auto exposures, employment-related liabilities, and crime or cyber threats continue to evolve, agencies must stay vigilant. Investing in the right insurance coverage, strengthening internal protocols, and working closely with experienced brokers can help mitigate these challenges and safeguard both their workforce and their bottom line. ◼