1. Forms
2. EP
3. EP-01-18

What the form is

The EP 01 18 Liability to Independent Contractors endorsement is designed to modify an Employment-Related Practices Liability (ERPL) insurance policy. Its primary function is to extend coverage to include certain claims made by independent contractors against the insured organization. Specifically, this endorsement provides coverage for liability arising from alleged wrongful acts, but only if those wrongful acts are a form of discrimination. Without this endorsement, ERPL policies typically limit coverage to claims made by employees.

Classes of business it applies to

This endorsement is relevant for businesses that frequently engage independent contractors and want to protect themselves from discrimination claims brought by these non-employees. Examples include:

• Companies that rely heavily on freelance workers (e.g., tech companies using contract developers, media companies using freelance writers or designers).
• Organizations that utilize independent sales representatives.
• Businesses in the gig economy that classify their workforce as independent contractors.
• Consulting firms that bring in specialized independent contractors for projects.

Real-world example: A company decides not to renew a contract with an independent marketing consultant. The consultant, who is a member of a protected class, believes the non-renewal was based on discriminatory reasons (e.g., age, race, gender) rather than performance. If the company has the EP 01 18 endorsement, their ERPL policy may respond to a discrimination lawsuit brought by this independent contractor.

Special considerations

Important points to consider regarding the EP 01 18 endorsement:

• Limited Scope of Coverage: Coverage is specifically for discrimination-based wrongful acts. Other types of wrongful acts alleged by independent contractors (e.g., breach of contract, non-discrimination related harassment) would likely not be covered by this endorsement.
• Definition of Independent Contractor: The policy and endorsement language should be reviewed to understand how 'independent contractor' is defined and to ensure it aligns with the insured's business relationships. Misclassification of employees as independent contractors can create separate legal and insurance coverage issues.
• Underlying ERPL Policy: The terms, conditions, and exclusions of the main ERPL policy will still apply. This endorsement modifies, but does not replace, the underlying coverage form.
• State Laws: State laws regarding discrimination and the definition of independent contractors can vary and may impact the application of this coverage.

Real-world example: A business uses independent contractors for delivery services. One contractor alleges they were denied more lucrative routes due to their national origin. With the EP 01 18 endorsement, the ERPL policy could provide a defense and potential indemnification for this discrimination claim. However, if the same contractor sued for non-payment of invoices (a breach of contract claim), this endorsement would not trigger coverage.

Key information for agents and underwriters

Practical insights for insurance professionals:

• Risk Assessment: Underwriters should assess the extent to which the insured utilizes independent contractors and the potential for discrimination claims from this group. This includes reviewing the insured's contracts with independent contractors and their anti-discrimination policies and training.
• Pricing: The premium for this endorsement will depend on the perceived increase in risk. Factors include the number of independent contractors, the nature of their work, the industry, and the insured's claims history.
• Coverage Gaps: Agents should explain the limited nature of this endorsement to clients, ensuring they understand it only applies to discrimination claims from independent contractors. Other potential liabilities arising from relationships with independent contractors (e.g., vicarious liability for their actions, contractual disputes) may require different types of coverage.
• Alternative Endorsements: Depending on the insurer, there might be broader endorsements available for covering liabilities related to non-employees, or specific endorsements for other types of claims from independent contractors. For example, ISO endorsement EP 01 20 provides coverage for Liability to Non-Employees for wrongful acts.
• Documentation: Clear documentation of who qualifies as an independent contractor versus an employee is crucial for the insured to avoid coverage disputes.