Aipedia: HR consultants

AI claims: HR consultant PI or client EPL?

Aipedia, by the Apex broking team · Last reviewed 2026-10-27

The client's EPL policy usually responds to the employee's claim, and the consultant's PI usually responds if the client or its insurer then pursues the adviser. Understanding that chain helps HR consultants set terms and cover before an AI-related claim arrives.

Part of: AI in HR consultants

In short

When an AI-assisted hiring, rating or redundancy decision leads to a claim, the employee sues the employer. The employer's EPL insurer, if any, usually defends. If the HR consultant designed the process or configured the tool, the employer or its insurer may bring a recovery claim, alleging failures such as ignoring Article 22C safeguards or bias testing. The consultant's PI usually responds to that, subject to the terms. Liability caps in your terms of business, discrimination and data protection exclusions, and whether the client has EPL all shape the outcome.

Two policies, two different insureds

When an AI-assisted HR decision goes wrong, two insurance policies may be relevant. The client employer may hold employment practices liability (EPL) insurance, which usually covers claims brought against the employer by its employees or job applicants, such as unfair dismissal and discrimination. The HR consultant holds professional indemnity (PI) insurance, which usually covers claims that the consultant's advice or service was negligent. They protect different parties against different claims. See EPL explained and PI versus EPL for HR consultants.

How a typical AI claim unfolds

A candidate or employee is affected by an AI-assisted decision: rejection by a CV sift, a low rating, selection for redundancy.
They bring a tribunal claim against the employer, perhaps alongside a data protection complaint.
The employer notifies its EPL insurer, if it has one, which handles the defence and any settlement subject to its terms.
The employer or its insurer reviews who caused the loss. If the HR consultant designed the process, configured the tool or gave the advice, a recovery claim against the consultant follows.
The consultant notifies its PI insurer, which considers the recovery claim under its own terms.

Recovery actions against the adviser

An EPL insurer that has paid a claim may be entitled to pursue the party it says caused the loss, using the employer's rights. This is called subrogation. Even without EPL, an uninsured employer can sue its adviser directly for the award, its costs and management time. In AI cases the allegations tend to be specific: the consultant did not warn that the tool made solely automated significant decisions under UK GDPR Article 22A; did not advise on the Article 22C safeguards; did not test for bias as recommended in the DSIT recruitment guide; or did not follow the ICO's expectation, set out in Recruitment rewired, of consistent human review.

Contract limits of liability

A consultant's terms of business are the first line of defence against a large recovery claim. A reasonable cap on liability, a clear description of the services and exclusions for decisions the client makes itself all affect what can be recovered. Caps must be reasonable to be relied on in many cases, and a client may resist them. Some clients ask the consultant to accept unlimited liability or to indemnify them for discrimination claims. PI usually covers liability you would have had anyway, but contractual liability that goes beyond that may be excluded, depending on the wording. See PI and terms of business caps and how PI treats contractual liability.

Where the gaps are

No EPL. Some small employers may not buy it, so the adviser's PI becomes the main source of recovery.
Discrimination-related exclusions. Some PI wordings limit losses arising from discrimination; check how yours treats a client's recovery claim.
Data protection. Fines on the client are commonly not insurable, and some PI policies limit data protection claims.
AI clauses. Some policies may include AI-specific terms; see AI exclusions and clauses.
Technology supply. If you supplied the AI tool rather than advised on it, HR consultant PI may not respond as expected.

What can go wrong

Illustrative: a consultant configures an AI shortlisting process for a client with automatic rejection. A rejected applicant brings a discrimination claim. The client's EPL insurer defends and settles, then writes to the consultant alleging negligent advice and seeking its outlay. The consultant's terms contain a cap, but the client argues it is unreasonable. The consultant's PI insurer handles the recovery claim, subject to its terms.

Practical steps

Ask clients whether they hold EPL and encourage it.
Describe your AI-related services precisely in your engagement terms.
Use a reasonable liability cap and avoid open-ended indemnities.
Record the risks you warned about and the decisions the client made.
Notify your PI insurer promptly when you hear of a potential claim.

How Apex helps

Apex arranges PI for HR consultants. A broker can review how your policy would respond to a recovery claim and how your terms of business sit alongside a client's EPL. Related: AI CV screening, redundancy scoring and AI in HR consulting.

Sources

Frequently asked

Does my client's EPL policy protect me as their HR consultant?

Usually not. EPL protects the employer against employee claims. If the EPL insurer pays a claim it believes your advice caused, it may pursue you, and your own PI is what usually responds to that recovery claim.

What is a recovery claim?

It is a claim by the client, or its insurer using the client's rights, to recover money paid to an employee or candidate from the adviser whose negligence is said to have caused the loss.

Can a liability cap protect me from AI claims?

A reasonable cap in your terms of business can limit what a client recovers, though it may be challenged. Avoid accepting unlimited liability or broad indemnities, which some PI policies may not cover.

Should I tell my PI insurer how I use AI?

Yes. Describe how AI features in your services, such as configuring recruitment tools. It helps make sure the cover matches your actual work and reduces arguments when a claim arrives.

Check your PI covers how you use AI

Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.