1. Forms
2. EP
3. EP-20-04

What the form is

The EP 20 04 Additional Insured - Independent Contractors endorsement is designed to be attached to an Employment-Related Practices Liability (ERPL) insurance policy. Its primary function is to extend coverage under the policy to include independent contractors who are performing services for the named insured. This means that if a claim arises from a wrongful act (as defined in the policy) related to the work these independent contractors do for the insured, this endorsement may provide them with coverage as an additional insured. It is crucial to understand that this endorsement explicitly states that it does not make the independent contractors employees of the named insured.

Classes of business it applies to

This endorsement is relevant for a wide range of businesses that utilize independent contractors and carry ERPL insurance. Examples include:

• Companies that regularly hire freelance professionals for creative, technical, or consulting projects.
• Organizations that use contract workers for specific, time-bound tasks or to supplement their workforce without hiring them as employees.
• Businesses in the gig economy that rely heavily on independent contractors to deliver services.
• Any company that wants to provide a measure of ERPL protection related to the actions of independent contractors performing work on their behalf, thereby potentially reducing their own direct and vicarious liability.

For instance, a marketing firm that hires freelance graphic designers and writers might use this endorsement to cover those contractors for employment-related claims (like harassment or discrimination) that might arise in the context of their work for the firm, provided the claim falls within the ERPL policy's terms.

Special considerations

Key considerations for the EP 20 04 endorsement include:

• Not a substitute for proper worker classification: This endorsement does not alter the legal status of an independent contractor to that of an employee. Misclassifying employees as independent contractors carries significant legal and financial risks (e.g., wage and hour violations, tax liabilities, benefits obligations), and this endorsement will not protect against those misclassification risks.
• Scope of Coverage: Coverage for the additional insured independent contractor is typically limited to liability arising out of the work they perform for the named insured. The specifics will be detailed in the endorsement and the main ERPL policy.
• Contractual Agreements: It's advisable for businesses to have clear, well-drafted contracts with their independent contractors that define the relationship, responsibilities, and any insurance requirements. This endorsement can complement such agreements.
• Underlying ERPL Policy: The coverage provided by this endorsement is subject to all the terms, conditions, exclusions, and limits of the underlying ERPL policy.

For example, if an independent contractor working on-site at a client's office is accused of harassing one of the client's employees, this endorsement could potentially provide coverage for the contractor under the client's ERPL policy, assuming the conditions of the policy and endorsement are met.

Key information for agents and underwriters

• Risk Assessment: Underwriters will need to assess the increased exposure brought by adding independent contractors. This includes understanding the number of contractors, the nature of their work, the level of interaction they have with the named insured's employees and third parties, and the contractual controls in place.
• Pricing: There may be an additional premium associated with this endorsement, reflecting the broadened scope of insured persons.
• Clarify Coverage Intent: Agents should ensure clients understand that this endorsement is for legitimate independent contractor relationships and does not cover individuals who should be classified as employees.
• Potential for Claims: While providing coverage, it's also a reminder that independent contractors can be a source of employment-related claims, either directly or vicariously against the named insured.
• Review Contracts: Agents should advise clients to review their independent contractor agreements to ensure they align with the insurance coverage and clearly delineate responsibilities.