1. Forms
2. EP
3. EP-01-01

Form EP 01 01: Amendment - Definition Of Employee

1. What the form is

Form EP 01 01, titled "Amendment - Definition Of Employee," is an endorsement to the standard Employment-Related Practices Liability (ERPL) Coverage Form EP 00 01. Its primary purpose is to modify the definition of who qualifies as an "Employee" under the policy. This modification can either broaden or restrict the scope of coverage by changing the categories of individuals considered employees for the purpose of employment practices liability claims. For instance, the standard definition of "employee" in an EPLI policy might include current, former, and prospective full-time and part-time staff. This endorsement allows insurers to tailor that definition to the specific needs and risk profile of the insured business.

2. Classes of business it applies to

This endorsement is relevant across a wide spectrum of industries and business types that purchase Employment-Related Practices Liability insurance. The need to amend the definition of an employee often arises in organizations with complex workforce structures. Examples include:

• Companies heavily reliant on temporary staff or seasonal workers: A resort or agricultural business might use this endorsement to explicitly include or exclude seasonal workers from the definition of "Employee," depending on their risk management strategy and the insurer's underwriting guidelines.
• Organizations utilizing independent contractors or leased employees: A tech company that frequently engages freelance developers or a manufacturing firm using workers from a staffing agency may need to clarify whether these individuals are considered "Employees" for EPLI coverage. This endorsement can specify if leased workers or independent contractors fall under the policy's protection.
• Businesses with a significant volunteer workforce: Non-profit organizations often rely on volunteers. Form EP 01 01 can be used to explicitly include bona fide volunteers acting under the direction of the insured, thereby providing coverage for claims arising from their alleged wrongful employment acts.
• Franchisors and Franchisees: The relationship between a franchisor and the employees of its franchisees can be complex. This endorsement could be used to clarify whether the franchisor has any EPLI exposure related to franchisee employees.

3. Special considerations

Several important considerations come into play when utilizing Form EP 01 01:

• Impact on Coverage Breadth: Carefully review whether the endorsement expands or restricts coverage. Broadening the definition to include, for example, independent contractors might increase the premium but provide more comprehensive protection. Conversely, restricting the definition might lower the premium but create potential coverage gaps.
• Clarity is Key: The language used in amending the definition of "Employee" must be precise to avoid ambiguity. For instance, if including "leased employees," the definition should align with how that term is defined elsewhere in the policy or by applicable law.
• State and Federal Laws: The definition of an employee can vary under different state and federal employment laws (e.g., for wage and hour, discrimination). While this endorsement modifies the insurance policy's definition, it doesn't alter legal obligations under employment statutes. It's crucial to ensure the insurance definition aligns with the company's actual legal exposures as much as possible.
• Interaction with Other Policy Terms: Consider how the amended definition of "Employee" interacts with other policy provisions, such as "Who Is An Insured" or specific exclusions. For example, the base form EP 00 01 typically includes employees as insureds. Modifying who is an employee directly impacts who qualifies as an insured under that provision.
• Real-world example: A company wants to ensure its long-term, regularly scheduled temporary workers, sourced through a specific agency and under their direct supervision, are covered. EP 01 01 could be used to amend the definition of "Employee" to specifically include these individuals, perhaps by referencing their work arrangements or contracts.
• Real-world example: An organization with a large, fluctuating volunteer base might use EP 01 01 to exclude volunteers from the definition of "Employee" to manage premium costs, opting instead to address volunteer-related risks through a different insurance mechanism or risk management practices. Conversely, they might use it to explicitly include them if that's a primary concern.

4. Key information for agents and underwriters

• Risk Assessment: Underwriters must carefully assess the implications of any change to the "Employee" definition. Expanding the definition to include more categories of individuals (e.g., independent contractors, volunteers) generally increases the insurer's exposure and may warrant additional premium. The underwriter will need to understand the nature and extent of the work performed by these additional individuals and the insured's management and oversight of them.
• Pricing Implications: The premium for EPLI coverage is often influenced by the number of employees. Modifying this definition directly impacts the employee count used for rating. Agents should clearly communicate how the endorsement affects the premium.
• Potential Coverage Gaps: If the endorsement restricts the definition of "Employee," agents should counsel insureds about potential coverage gaps. For example, if temporary workers are excluded, the insured might be unprotected against claims brought by this group unless covered elsewhere.
• Underwriting Guidelines: Insurers will have specific underwriting guidelines regarding the acceptability of certain modifications. For instance, an insurer might be hesitant to broadly include all independent contractors without understanding the contractual relationships and controls in place. They may also have specific versions of this endorsement for common scenarios, like including volunteers for non-profits.
• Clarity of Intent: Both agents and underwriters need to ensure the reason for the endorsement and its intended effect are clearly documented. This helps prevent misunderstandings at the time of a claim. For example, if the intent is to cover temporary employees only while under the direct control and supervision of the insured, the endorsement language should reflect that.
• Real-world example for underwriters: If an insured requests to include independent contractors via EP 01 01, the underwriter would likely inquire about the number of contractors, the type of work they perform, the terms of their contracts (especially indemnification and insurance clauses), and the insured's processes for managing and supervising these individuals to assess the increased risk.
• Real-world example for agents: An agent advising a client with many seasonal workers should discuss the pros and cons of including them in the "Employee" definition using EP 01 01, considering the potential for claims from this group versus the impact on premium. They might also explore if the insurer offers specific endorsements tailored to seasonal workforces.

Form EP 01 01 is a critical tool for customizing EPLI coverage to the unique workforce composition of an insured. It requires careful consideration by all parties to ensure the resulting coverage accurately reflects the intended scope of protection and the associated risks.