1. Forms
2. EP
3. EP-20-02

What the Form Is

The EP 20 02 Additional Insured - Controlling Interests endorsement is designed for use with an Employment-Related Practices Liability (EPL) insurance policy. Its primary purpose is to extend coverage under the named insured's EPL policy to include entities or individuals that hold a significant financial or operational control over the named insured. By adding a controlling interest as an additional insured, this endorsement provides them with protection against claims alleging wrongful employment acts committed by the named insured, subject to the policy's terms and conditions.

Classes of Business It Applies To

This endorsement is relevant for a wide range of businesses that carry EPL insurance and have a discernible controlling entity. Examples include:

• Parent Companies: A parent corporation can be added as an additional insured to the EPL policy of its subsidiary.
• Private Equity Firms or Venture Capital Firms: Firms that have a controlling stake in a portfolio company may seek this endorsement to protect their interest from employment-related claims against that company.
• Majority Shareholders or Owners: Individuals who hold a controlling financial interest in a company might be added.
• Franchisors: In some cases, a franchisor with significant control over a franchisee's operations might utilize a similar concept, though specific franchisor endorsements may also exist.

For instance, if "ABC Corp" is wholly owned by "Parent Holdings Inc.", the EP 20 02 could be used to add Parent Holdings Inc. as an additional insured to ABC Corp's EPL policy. If an employee of ABC Corp sues for wrongful termination and names both ABC Corp and Parent Holdings Inc. (alleging the parent company influenced the decision), this endorsement would provide a path for Parent Holdings Inc. to be covered under ABC Corp's policy.

Special Considerations

• Scope of Coverage: It's crucial to understand that the coverage for the additional insured (the controlling interest) is typically limited to liability arising from the employment practices of the named insured. The endorsement generally does not cover the controlling entity for its own, separate wrongful employment acts unrelated to the named insured.
• Definition of "Controlling Interest": The policy or endorsement may define what constitutes a "controlling interest." This could be based on ownership percentage, voting rights, or contractual agreements. Clarity on this definition is important.
• Exclusions: The underlying EPL policy's exclusions will still apply to the additional insured.
• Limits of Liability: The addition of an additional insured typically does not increase the policy's overall limits of liability; the limits are shared between the named insured and all additional insureds.
• Reporting of Claims: Procedures for reporting claims involving the additional insured should be clear.

For example, if a private equity firm (the controlling interest) is added as an additional insured to a portfolio company's EPL policy, and the PE firm is sued directly for its own hiring practices at the PE firm level (not related to the portfolio company), the EP 20 02 on the portfolio company's policy would likely not provide coverage for that separate matter.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters need to evaluate whether the controlling entity's involvement significantly alters the risk profile of the named insured. Does the controlling entity exert influence over employment policies, hiring/firing decisions, or workplace culture in a way that could increase the likelihood or severity of EPL claims?
• Underwriting Information: Information about the controlling entity, its relationship with the named insured, and its own employment practices history might be relevant for underwriting.
• Potential for Increased Exposure: Adding a controlling interest, especially a large or litigious one, could be perceived as increasing the insurer's exposure, even if coverage is for vicarious liability.
• Pricing: A nominal charge or no charge might apply for this endorsement, but in some cases, particularly if the controlling interest presents a higher risk, an additional premium could be warranted.
• Clarity of Intent: Ensure all parties (named insured, controlling interest, and insurer) have a clear understanding of the scope of coverage provided by the endorsement to prevent disputes at the time of a claim.
• Interaction with Other Policies: Consider how this endorsement interacts with any separate EPL or D&O insurance the controlling entity might carry.