1. Forms
2. EP
3. EP-03-01

What the Form Is

The EP 03 01 Co-Payment Liability Insurance endorsement is an optional modification to an Employment-Related Practices Liability (ERPL) insurance policy. Its primary function is to replace the policy's standard deductible provision with a co-payment mechanism. Instead of the insured paying a fixed amount (deductible) before the policy responds, under this endorsement, the insured shares in the cost of each claim by paying a predetermined percentage of the loss, subject to a maximum co-payment amount. Both the co-payment percentage and the maximum amount are specified in the schedule of the endorsement.

Classes of Business It Applies To

This endorsement can be used for a wide range of businesses that purchase Employment-Related Practices Liability insurance. ERPL coverage itself is crucial for organizations of all sizes and across various industries that face risks of employment-related claims, such as:

• Wrongful termination
• Discrimination (based on age, gender, race, disability, etc.)
• Harassment (sexual or other forms)
• Retaliation
• Other employment-related torts

Real-world examples:

• A mid-sized technology company concerned about potential discrimination claims.
• A restaurant chain aiming to manage its financial exposure to harassment lawsuits.
• A non-profit organization seeking to protect itself from wrongful termination allegations.

The co-payment structure might be attractive to businesses that prefer to share a smaller, predictable portion of each claim rather than facing a potentially large, one-time deductible payment.

Special Considerations

• Negotiable Terms: The co-payment percentage and the maximum co-payment amount are critical terms that are typically negotiated between the insured and the insurer and must be clearly stated in the endorsement's schedule.
• Cash Flow Management: For the insured, a co-payment might offer a more predictable impact on cash flow per claim compared to a straight deductible, especially if multiple smaller claims occur.
• Incentive for Risk Management: The co-payment feature can incentivize the insured to actively participate in claim mitigation and defense, as they bear a direct financial portion of each loss.
• Clarity of Application: It's important for the insured to understand how the co-payment applies, particularly in relation to defense costs versus indemnity payments, as per the terms of the underlying ERPL policy and the endorsement.

Key Information for Agents and Underwriters

• Risk Appetite and Pricing: Underwriters will assess the insured's risk profile and loss history when determining acceptable co-payment percentages and maximums. These terms will directly influence the premium calculation for the ERPL policy. A higher co-payment (percentage or maximum) assumed by the insured might lead to a lower premium, and vice-versa.
• Underwriting Guidelines: Insurers will have specific underwriting guidelines regarding when this endorsement can be offered and the range of acceptable co-payment terms based on the size of the insured, industry, claims history, and overall risk management practices.
• Coverage Explanation: Agents must clearly explain to clients the difference between a co-payment and a deductible, ensuring the client understands their financial obligations in the event of a claim. This includes how the co-payment interacts with the policy limits and other coverage terms.
• Claim Handling Impact: The co-payment can foster a more collaborative approach to claims handling between the insurer and the insured, as both have a vested financial interest in the outcome of each claim from the outset.