Staffing Firms: Your Guide to Insurance Requirements
April 1, 2025
In the Staffing & Recruitment industry, you’ve probably come across contracts that require you to carry specific types of insurance before working with a client. But here’s the catch: many of these requirements are pulled from generic templates and may have little to do with the actual work you’re doing. And if you’re not careful, you might end up paying for policies that don’t even apply to your services—cutting into your bottom line.
So, how do you know which insurance requirements are essential, which are negotiable, and which simply don’t make sense for your business? While we always encourage engaging your broker and/or legal counsel for contract reviews, we also want to equip you with the baseline tools to make informed decisions and protect your business without overextending your insurance budget. Keep reading for a guide of the most common insurance requirements that staffing firms may encounter in contracts—and our recommendations for how to proceed.
Disclaimer: Please note that the information presented herein is general in nature and provided for educational purposes only. It is not exhaustive nor is it a substitute for legal or insurance advice. For specialized guidance, please engage with your insurance broker and consult a lawyer.
1. Professional Liability, aka Errors & Omissions (E&O)
What is it?
This coverage protects your business from claims of professional negligence, errors, or omissions that could lead to financial losses for your clients. As a Staffing & Recruitment firm, you’re responsible for sourcing, vetting, and placing appropriate candidates. If a client sustains a financial loss as a result of a placement, they may seek damages against your company.
PRO Tips:
Professional Liability Insurance is generally required by clients as part of their contracts, and all Staffing & Recruitment firms should maintain this essential coverage to safeguard their business and reputation. No matter how diligent you are, mistakes can happen, and clients can be unpredictable—a single lawsuit could end up costing your firm thousands.
Keep in mind: not all insurance is created equally! Be sure to invest in the right coverage, designed specifically for Staffing & Recruitment Firms to protect your financial viability. Generalized coverage from a non-specialized broker won’t cover the unique risks you face from placing candidates, working with different clients, or handling cross-border recruitment.
RELATED: Professional Liability Insurance: What is it, What’s Covered, and What’s Not?
2. Commercial General Liability (CGL)
What is it?
Commercial General Liability Insurance provides coverage for third-party bodily injury, property damage, and personal injury claims arising from business operations. While staffing firms may not always have direct physical operations, they can still face liability risks if a placed worker causes damage or injury at a client site, or reputational harm as a result of allegations of libel, slander, defamation, or false advertising.
PRO Tips:
CGL Insurance is often required by clients as part of their contracts, and all Staffing & Recruitment Firms should maintain this critical coverage to protect themselves from the unexpected. Whether your business is large or small, in-person or online, family-run or a solo operation, you could be liable if any kind of damage or injury to a client, visitor, or other third-party is traced back to your company. Additionally, the actions of placed candidates are unpredictable and you could be held at least partially responsible in the case of a claim of that nature.
RELATED: All About Commercial General Liability Insurance: What is it, What’s Covered, and What’s Not?
3. Workers’ Compensation
What is it?
Workers’ Compensation Insurance provides coverage for workplace injuries and illnesses, ensuring that employees receive medical care and wage replacement if they’re hurt on the job. This coverage is always the first to respond to workplace injury claims, before any other type of coverage.
PRO Tips:
In Canada, Workers’ Compensation coverage is mandatory and managed through your provincial Workers’ Compensation Board—it’s not available through insurance companies. Be sure to comply with the requirements of the province where their workers are placed, and clients will typically require proof of coverage.
4. Employers’ Liability
What is it?
Employer’s Liability is most commonly included under CGL Insurance, and provides coverage if an employee sues their employer for a work-related injury, claiming negligence. As a Staffing & Recruitment firm, it’s difficult for a placed candidate to prove negligence on your part, as those candidates are working at a client site—that means the client is ultimately responsible for the safety of their premises.
PRO Tips:
Employer’s Liability isn’t typically required by clients because Workers’ Compensation acts as the primary coverage for workplace injuries. However, some client contracts may still include it as a requirement, often as a standard clause carried over from other jurisdictions where lawsuits against employers are more common. If a client requests this coverage, clarify whether it’s necessary and consult with your broker to see if it’s included in your CGL policy.
RELATED: Your Commercial General Liability Coverages Explained
5. Crime or Fidelity (Employee Dishonesty)
What is it?
Crime or Fidelity Insurance protects Staffing Firms against financial losses caused by employee dishonesty, such as theft of money, property, or securities from a client. Since placed candidates work at client sites and may have access to sensitive assets, this coverage helps safeguard you and your clients from potential fraud or theft.
PRO Tips:
Given the risks in this industry, Crime Insurance is a common requirement in client contracts. Vetting candidates can be complex, and even with the most rigorous screening processes, there’s always a risk that a placed worker could commit dishonest acts, especially if they’re under stress or financial hardship—that’s why we strongly suggest that all Staffing & Recruitment Firms secure this critical coverage.
6. Employment Practices Liability (EPL)
What is it?
This policy is intended to provide coverage in the event your Staffing & Recruitment firm is sued by employees for such wrongful acts as wrongful termination, harassment, discrimination, and more.
Keep in mind that EPL insurance is designed to cover claims from your employees, but doesn’t always account for placed candidates. Additionally, EPL policies only cover the company who purchased it (the Named Insured), so it’ll only apply if your firm is sued—not if your client is sued.
PRO Tips:
To avoid being left in the lurch, work with a broker who understands the specific risks of your industry. If you secure EPL coverage through PROLINK, we’ll make sure that your coverage extends to cover claims made by not only your own staff, but also any placed individuals. We would recommend trying to remove the EPL requirement from contracts; however, we still suggest that all Staffing Firms carry this insurance for their own protection.
Recent cases have shown that when independent contractors are out of work for a period of time, some may seek legal action to claim they were actually employees—not contractors—in an effort to obtain severance, vacation pay, and other entitlements.
RELATED: Employment Practices Liability Insurance: What is it, What’s Covered, and What’s Not?
7. Network Security & Privacy Breach Liability (aka Cyber Liability)
What is it?
Cyber Insurance is typically offered as a standalone policy, protecting Staffing Firms against financial losses from cyber threats, such as data breaches, ransomware, and network security failures. For more information on how Cyber Insurance helps Staffing & Recruitment firms, check out our blog: Data Breaches: How Staffing Firms Can Prepare for Unexpected Lawsuits.
PRO Tips:
While many client contracts may require vendors to maintain this coverage, it’s only intended to cover the Staffing Firm’s own network and doesn’t extend to any data breaches experienced by the client, even if the incident was caused by a candidate you placed. Since it doesn’t directly protect your clients, your firm might be able to negotiate its removal from the contract. However, with online threats higher than ever in today’s environment, we strongly recommend that all Staffing & Recruitment Firms hold some level of Cyber coverage.
Given the vast amount of personally identifiable information your company holds on candidates and employees, even a single data breach can lead to significant financial and legal consequences under strict privacy laws.
RELATED: All About Cyber Insurance: What is it, What’s Covered, and Why Do You Need it?
8. Property Insurance
What is it?
Property Insurance provides coverage for any physical office space that your company maintains, including equipment and contents, in the event of damage or loss. However, since your property likely isn’t directly tied to the Scope of Work for client services, this requirement shouldn’t be applicable in client contracts. This coverage also doesn’t cover any property owned by a third party (i.e., a client).
PRO Tips:
Since Commercial General Liability Insurance already provides coverage for third-party property damage, we suggest that Staffing & Recruitment Firms negotiate the removal of this requirement from contracts. Each company should carry its own Property Insurance to protect its assets, and as a Staffing Firm, you’re not responsible for a client’s physical office or equipment.
RELATED: All About Commercial Property Insurance: What is it, What’s Covered, and What’s Not?
9. Pollution Liability
What is it?
Pollution Liability Insurance is designed to cover environmental risks, such as contamination or hazardous material spills. However, Staffing Firms do not control the work environment of the client—they are obligated to protect themselves from any resultant pollution or environmental risks.
PRO Tips:
Depending on the nature of the work, some contracts may ask for Pollution Liability. But since your company is only responsible for sourcing the right candidates and cannot mitigate or remediate environmental risks, this coverage generally shouldn’t apply. We recommend that Staffing & Recruitment Firms negotiate the removal of this requirement from contracts.
10. Primary & Non-Contributory and Waiver of Subrogation
What are they?
The Primary & Non-Contributory clause means your insurance will respond first in the event of a claim, and you can’t rely on the client’s insurance to contribute.
A Waiver of Subrogation means that you (and your insurance company) are agreeing to waive the right to pursue the client when a claim occurs, even if the client is determined to be partially or fully negligent. Therefore, you’re taking on the obligation of potentially covering the entire claim.
PRO Tips:
Clients often include these requirements to shift more financial responsibility off of themselves. While you might be inclined to agree in order to appease them—remember that assuming unnecessary liability can backfire on you. If you take on more of their claims, your insurance carrier may view you as a higher-risk policyholder, leading to increased premiums, stricter coverage terms, or even denial of renewal. We strongly advise negotiating the removal of these clauses from contracts whenever possible.
Need more guidance?
If you need more help decoding insurance requirements and negotiating contract terms for your specific situation, consider working with a risk advisor who specializes in the Staffing & Recruitment industry. That’s where PROLINK comes in.
With over 40 years of experience and over 20 years of serving Staffing Firms, PROLINK has an unmatched understanding of the unique risks you face. We can share insights from others in your industry, clarify complex insurance clauses, and ensure you have the protection you need—while avoiding unnecessary costs. Our dedicated team will help you:
- Navigate industry trends and identify exposures based on your needs and business operations;
- Adopt a proactive approach to risk management to control your costs long-term;
- Conduct a full analysis of your existing insurance policies to detect any coverage gaps; and
- Secure a specialized solution that aligns with your strategic objectives.
To learn more about your exposures—and how you can protect yourself—connect with PROLINK today!
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PROLINK’s blog posts are general in nature. They do not take into account your personal objectives or financial situation and are not a substitute for professional advice. The specific terms of your policy will always apply. We bear no responsibility for the accuracy, legality, or timeliness of any external content.