1. Forms
2. EP
3. EP-01-14

What the Form Is

The EP 01 14 Counsel Selection endorsement is an amendatory endorsement designed to be attached to an Employment-Related Practices Liability (ERPL) insurance policy. Its primary purpose is to give the named insured a voice in the selection of legal counsel in the event of a claim that requires a defense under the policy. Typically, insurers have a panel of pre-approved law firms they assign to defend claims. This endorsement modifies that standard procedure by allowing the insured to approve or, with reasonable grounds, disapprove the counsel selected by the insurance company.

Classes of Business It Applies To

This endorsement is relevant for any business or organization that has or is seeking Employment-Related Practices Liability Insurance. EPLI policies cover claims arising from employment-related wrongful acts, such as discrimination, harassment, wrongful termination, and retaliation. Since virtually any entity with employees faces these risks, this endorsement can be pertinent across a wide array of industries and business sizes. Examples include:

• Private companies (small, medium, and large)
• Publicly traded corporations
• Non-profit organizations
• Healthcare providers
• Educational institutions
• Professional service firms (e.g., law firms, accounting firms)
• Retail and hospitality businesses

For instance, a tech startup concerned about potential wrongful termination lawsuits as it grows, or a large manufacturing company wanting to ensure specialized legal representation in a complex discrimination case, might find this endorsement valuable.

Special Considerations

There are several important points to consider regarding the EP 01 14 endorsement:

• Reasonableness of Disapproval: The endorsement specifies that the insured's disapproval of the insurer's choice of counsel must be reasonable. What constitutes "reasonable" can be subjective and may lead to discussions or even disputes between the insured and the insurer. Grounds for reasonable disapproval might include a lack of specific expertise by the proposed counsel in the relevant area of employment law, conflicts of interest, or a poor track record.
• Panel Counsel vs. Off-Panel Counsel: Insurers often maintain lists of "panel counsel" – law firms with whom they have negotiated rates and established working relationships. While this endorsement gives the insured a say, it doesn't automatically grant the right to choose any attorney without regard to cost or the insurer's other considerations. The insurer might still prefer panel counsel, and the use of off-panel counsel could be subject to negotiation regarding rates and terms.
• Defense Costs: The endorsement addresses the selection of counsel, not necessarily the cost of that counsel. The underlying policy terms and conditions regarding defense costs, including hourly rates and litigation management guidelines, will generally still apply. If the insured insists on counsel whose rates are significantly higher than what the insurer deems reasonable or customary, there might be a co-payment or out-of-pocket expense for the insured.
• Timing of Selection: The process and timing for counsel selection and approval should be understood by both parties to avoid delays in defending a claim.

For example, if a hospital insured under an EPLI policy faces a class-action lawsuit alleging systemic discriminatory hiring practices, the hospital might want to use a nationally recognized law firm specializing in such complex employment litigation, even if that firm is not on the insurer's standard panel. The EP 01 14 would provide the contractual basis for the hospital to request this specific firm, subject to the insurer's reasonable approval.

Key Information for Agents and Underwriters

• For Agents: It is crucial to discuss this endorsement with clients, particularly those who have strong preferences for their legal representation, operate in niche industries requiring specialized legal knowledge, or have had past experiences where counsel selection was an issue. Agents should clearly explain the "reasonableness" clause and manage the client's expectations regarding the insurer's ultimate control over defense costs. Highlighting this option can be a value-added service, demonstrating a thorough understanding of the client's potential needs.
• For Underwriters: From an underwriting perspective, this endorsement might be seen as a slight increase in the potential for administrative complexity or increased defense costs if it leads to more frequent use of off-panel counsel or disagreements over counsel selection. Underwriters should assess the insured's overall risk profile, including their litigation history and management's approach to handling claims. While the "reasonableness" requirement provides a safeguard for the insurer, the potential for friction exists. The endorsement's impact on pricing is typically minimal on its own, but it can be a factor in the overall assessment of the EPLI risk.
• Coverage Gaps: The EP 01 14 endorsement itself does not create coverage gaps. It pertains to the process of selecting defense counsel. The underlying EPLI policy's terms, conditions, exclusions, and limits of liability remain in full effect.