When workplace culture becomes a claim: sexual misconduct risk in law firm
Janine Parker, executive director at Gallagher, explores why law firms should discuss sexual misconduct as part of the firm’s insurance programme design, as well as a people and HR issue
Sexual misconduct is not only a people issue for law firms. It is also a governance, regulatory and insurance issue. The Solicitors Regulation Authority (SRA) describes sexual misconduct involving solicitors as among the most serious matters it deals with, and in 2022/23 it referred 11 such cases to the Solicitors Disciplinary Tribunal (SDT). In the same year, the SRA recorded the first striking off of a solicitor for sexual misconduct where there had been no criminal conviction.
The legal sector is not the only one facing scrutiny. Financial services have seen a more developed regulatory data set: the FCA’s wholesale-sector survey found reported non-financial misconduct incidents increased between 2021 and 2023, with bullying and harassment accounting for 26% and discrimination 23% of reported incidents. The comparison is not like-for-like, but it is useful because both sectors involve high-pressure environments, reputation-sensitive employers and individuals whose career progression can depend on senior sponsorship.
That power dynamic is central to the legal-sector risk. The SRA’s sexual misconduct guidance expressly recognises that abuse of an uneven or unequal power relationship can be a common feature, including conduct that incentivises career advancement, intimidates through threats to career progression or punishes through poor appraisals. For law firms, this matters because the risk may not sit solely in a formal complaint. It may arise from supervision, work allocation, appraisal, promotion, partnership-track decisions, work travel, client entertainment or office social events.
The legal framework has also changed, and that adds to the risk picture. Since 26 October 2024, UK employers have had a positive duty to take reasonable steps to prevent sexual harassment. The EHRC’s technical guidance says employers must understand both their legal responsibilities and the preventative steps they should take, and Acas states that the duty covers sexual harassment by people at work and by third parties such as clients and customers. That is highly relevant for law firms, where employees may work closely with partners, clients, counsel, referrers and other external contacts.
Where an employee alleges sexual harassment or related misconduct, the first insurance question is usually not professional indemnity. A pure employee claim is more likely to sit within Employment Practices Liability (EPL), often purchased as part of a wider management liability programme. EPL generally can cover allegations including sexual and non-sexual harassment, discrimination, negligent hiring, supervision or retention, failure to promote or make partner, emotional distress, retaliation and privacy breaches. Insurers similarly describe EPL as protecting companies and employees against allegations of employee-rights violations, including sexual harassment, discrimination and wrongful termination, with cover for defence costs, settlements and judgments.
The response, however, depends on your policy wording. EPL policies are commonly written on a claims-made basis, so early notification is critical. Policies may be triggered at an early stage, when an employee raises a demand for relief following an alleged employment-related wrong and warns that even apparently low-value or unmeritorious grievances can become costly to defend. For law firms, HR, risk, and management teams therefore need clear internal escalation routes so that grievances, protected disclosures, and regulator-sensitive allegations are not treated solely as ordinary employee relations matters.
A well-structured programme should also consider whether D&O or management liability should be notified. If allegations involve a partner, board member, compliance officers for legal practice (COLP), managing partner or senior manager, the claim may contain allegations of poor oversight, failure to act, retaliation, negligent supervision or breach of governance duties. D&O cover will not necessarily protect the firm itself against an employee claim, but it may be relevant to insured individuals and to parallel investigations or claims.
There are also important limits. Insurance is not designed to protect deliberate wrongdoing or remove the consequences of regulatory discipline. Regulatory fines, sanctions, strike-off or suspension are not the kind of balance-sheet loss a firm should assume will be insured. Coverage may also be affected by bodily injury exclusions, prior-acts issues, late notification, allocation between covered and uncovered loss, and insurer-consent requirements for defence strategy or settlement. Some EPL covers can include useful extensions such as public relations costs, regulatory investigation costs and sensitivity training costs.
For law firms, the practical lesson is that sexual misconduct should be discussed as part of the firm’s insurance programme design, not only as a conduct or HR issue. That discussion should include:
- Whether EPL is purchased
- Whether the limit is adequate for defence costs, settlement and reputational support
- How EPL interacts with D&O
- Whether regulatory investigation costs are included
- How claims-made notification works
- Whether partners and senior managers are included as insured persons.
The key takeaway is that the insurance programme should be assessed early so the firm understands what may respond and what will not.
However, also be aware that insurance is only one part of the answer. The stronger risk control message is that firms need to evidence prevention: policies, training, reporting routes, supervision standards, documented investigations, controls around social events and clear consequences for misconduct. In a sector built on trust, a sexual misconduct allegation can move quickly from an internal grievance to an employment claim, regulatory report, reputational issue and management-liability matter. The insurance programme will respond best when the firm has treated the risk seriously before the claim arrives.
