1. Forms
2. PR
3. PR-21-01

What the Form Is

The PR 21 01 Exclusion – Employees as Insureds is an endorsement developed by the Insurance Services Office (ISO) for use with specific professional liability coverage forms. Its primary function is to amend the 'Who Is An Insured' section of the policy to explicitly remove employees of the named insured from the definition of an insured. This means that the professional liability coverage provided by the policy will not extend to cover the individual professional acts or omissions of the employees.

Classes of Business It Applies To

This endorsement is specifically designed for use with certain healthcare-related professional liability coverage forms. Examples of entities where this endorsement might be applied include:

• Blood Banks
• Diagnostic Testing Laboratories
• Hospitals

For instance, a hospital might use this endorsement if its employed physicians are required to carry their own individual medical malpractice insurance, and the hospital's policy is intended to cover only the entity's liability and that of other specified insureds, but not the individual liability of all its employees.

Special Considerations

The decision to use the PR 21 01 endorsement has significant implications for coverage. Key considerations include:

• Existence of Other Coverage: It's crucial to determine if employees have their own individual professional liability insurance. If not, this endorsement would leave them without coverage for their professional services rendered on behalf of the employer.
• Contractual Requirements: Employment contracts or other agreements may stipulate whether the employer is obligated to provide professional liability coverage for its employees.
• Risk Management Strategy: An organization might choose to use this endorsement as part of a broader risk management strategy, potentially to reduce its own insurance costs or to encourage employees to be more directly accountable for their professional conduct through individual insurance.

For example, a diagnostic testing laboratory might opt for this endorsement if it employs highly specialized technicians who are contractually obligated to maintain their own malpractice coverage. The lab's policy would then focus on the entity's direct liabilities.

Key Information for Agents and Underwriters

Agents and underwriters need to be acutely aware of the impact of this endorsement:

• Agents: Must clearly explain to the insured the consequences of removing employees as insureds. This includes ensuring the insured understands potential coverage gaps for their employees and the implications for their overall risk exposure and potential vicarious liability.
• Underwriters: When this endorsement is attached, the underwriter's focus shifts. While the named insured entity is still covered, the risk associated with the direct professional acts of employees is ostensibly removed from this specific policy. However, underwriters should inquire about the professional liability coverage arrangements for the employees (e.g., individual policies, other group policies) to understand the complete picture and potential for uncovered claims that might still indirectly impact the named insured. Pricing may be affected, but the underwriter must also consider the potential for increased defense costs if claims arise involving uninsured employees, even if the policy intends to exclude them. The underwriter should also be aware that this endorsement modifies the standard coverage provided by forms such as PR 00 03 (Hospital Professional Liability Coverage Form), PR 00 04 (Blood Banks Professional Liability Coverage Form), PR 00 07, PR 00 08, PR 00 09 (Diagnostic Testing Laboratories Professional Liability Coverage Form), and PR 00 10.