1. Forms
2. EP
3. EP-01-13

What the form is

The EP 01 13 "Who Is an Insured - Outside Director, Trustee, Officer or Member" is an amendatory endorsement to an Employment-Related Practices Liability (EPL) insurance policy. Its primary function is to extend coverage to employees of the named insured entity who undertake roles as directors, trustees, officers, or members of an external not-for-profit organization. A critical condition for this coverage extension is that the employee must be serving in that external capacity with the explicit written permission of the named insured (their employer). This endorsement clarifies who qualifies as an 'insured' under the EPL policy for activities performed on behalf of these outside organizations.

Classes of business it applies to

This endorsement is particularly relevant for businesses that encourage or permit their employees, especially executives or managers, to participate in community service or professional development by serving on boards or in leadership positions of not-for-profit organizations. Examples include:

• Companies with corporate social responsibility programs that involve employee engagement with local charities.
• Businesses whose leaders serve on the boards of industry associations or educational institutions.
• Professional service firms (e.g., law firms, accounting firms) where partners or senior staff may hold positions in non-profit organizations related to their field.

For instance, if a company's CFO serves on the board of a local charitable organization with the company's written consent, and a claim related to employment practices (such as wrongful termination or discrimination) is brought against the CFO in their capacity as a board member of that charity, this endorsement would aim to provide EPL coverage under the CFO's employer's policy.

Special considerations

• Written Permission: The requirement for written permission from the named insured is paramount. Without this documented consent, coverage for the employee's activities with the outside organization may be denied.
• Not-for-Profit Organizations: The endorsement typically specifies that the outside organization must be a not-for-profit entity.
• Scope of Coverage: Coverage is generally for employment-related wrongful acts, consistent with the underlying EPL policy. It does not typically extend to other liabilities the employee might incur in their outside role (e.g., mismanagement of the non-profit's finances, unless it's an employment-related claim).
• Other Insurance: The not-for-profit organization itself may have its own Directors and Officers (D&O) or EPL insurance. This endorsement can provide an additional layer of protection or fill gaps, but coordination of benefits might be a factor in the event of a claim.

Key information for agents and underwriters

• Risk Assessment: Underwriters should inquire about the extent to which the insured's employees serve on outside not-for-profit boards. The nature, size, and activities of these not-for-profit organizations could influence the risk profile. It's also pertinent to understand if these external entities maintain their own D&O or EPLI coverage.
• Documentation: Agents must stress to their clients the importance of maintaining clear, written records of permission granted to employees for such outside service. This documentation is crucial for claim validation.
• Potential for Increased Exposure: While promoting good corporate citizenship, allowing employees to serve on outside boards can increase the named insured's EPL exposure if those outside entities have poor employment practices or are litigious.
• Coverage Clarity: This endorsement provides valuable clarity. Without it, an employee serving an outside organization might not be considered an insured for those activities, potentially leading to coverage disputes or personal liability for the employee.
• Pricing: The addition of this endorsement might have a nominal impact on the premium, but it could be more significant if many employees are involved or if the external organizations present higher risks. Underwriters will assess this on a case-by-case basis.