(December 2020)
This is one of the most useful and effective endorsements that the National Council on Compensation Insurance, Inc. (NCCI) ever developed. It was not used often until Professional Employer Organizations (PEOs) became widespread.
Related Article: Professional Employer Organization (PEO) Companies
WC 00 03 01 A–Alternate Employer Endorsement should always be added to workers compensation policies that cover temporary employment agencies. However, other employers should also consider this endorsement. Workers compensation and employers liability coverage extends to the named insured's employees when they are leased or provided to its client customers listed on the endorsement schedule. This endorsement is used when the insured named in Item 1. on the Information Page agrees to provide workers compensation and employers liability insurance for claims its employees make while they are working for the alternate employer listed on the endorsement schedule. If the named insured's business is to provide temporary workers to others, the insurance company may substitute the words "all" or "any" instead of scheduling alternate employers.
This endorsement is very flexible. It can be used in many situations where another organization could be considered the statutory employer except for the contractual relationship between the named insured and that organization.
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Example: Great Electrical Contractor is the named insured, and its employees perform all electrical work for Large Insurance Company. Great hired employees who work exclusively at Large. Large requires that Great endorse its policy to show Large as the alternate employer to prevent Large from being brought into a workers compensation claim for Great’s employees. |
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Example: Long Range Planning, Inc. manages 25 office buildings owned by Big Money property owner. Long Range hires the maintenance staff and office management at each location. Big Money requests that Long Range endorse its policy to show Big Money as the alternate employer for those persons Long Range hires to work exclusively at Big Money’s properties. |
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Example: Mainstay Employment provides employees to different clients. The employees work entirely at the client locations. Mainstay attaches this endorsement and, instead of listing alternate employers, enters the word “all” on the form. The result is that all clients are considered alternate employers for the workers provided by Mainstay. |
As stated above, this endorsement applies only with respect to bodily injury to the named insured's employees who perform work for the alternate employer in the state listed on the endorsement schedule. Part One–Workers Compensation Insurance and Part Two–Employers Liability Insurance apply as if the alternate employer is the named insured. If there is an entry made in item 3. on the endorsement schedule, this endorsement applies to only the named insured's employees' work performed at the project or under the contract.
In most states, the named insured’s insurance company handles Part One – Workers Compensation claims for these employees. However, in some states, the alternate employer may be required to pay the claims. In those cases, the named insured’s insurance company reimburses the alternate employer.
This coverage is not a replacement workers compensation policy, so it does not satisfy the alternate employer's obligations under the workers compensation law. Therefore, the insurance company does not file evidence with any government agency that this insurance exists on the alternate employer’s behalf.
The insurance company does not expect the alternate employer's insurance company to participate in or share a covered loss. Because the named insured’s insurance company is responsible for the claims, the named insured must pay the premiums for its employees who work for the alternate employer.
It is very important that the alternate employer knows that the insurance company does not have any obligation to notify it when the named insured’s policy is cancelled. This could leave the alternate employer in a difficult situation if the named insured does not replace its coverage.
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Example: Jefferson Drywall has two employees who work exclusively for Gracious Apartments. Gracious is named as an alternate employer on Jefferson’s workers compensation policy. Gracious does not carry its own Workers Compensation policy because it does not have any direct hire employees. Jefferson’s policy is cancelled for nonpayment of premium and is not replaced. Jacob, one of Jefferson’s employees who works for only Gracious, is seriously injured while installing drywall for Gracious. Jacob’ files a claim with both Jefferson and Gracious. The courts determine that Gracious is Jacob’s statutory employee and must pay the entire claim. |
In addition, the alternate employer has duties under the policy. Part Four–Your Duties If Injury Occurs applies to both the named insured and the alternate employer. Further, the alternate employer must recognize the insurance company's rights under Part One and Part Two, as well as its rights to inspect as provided under Part Six.
This endorsement completely protects the named insured employer, the alternate employer, and the employees. However, the named insured retains the rights of the policy. One of the most important ones is probably notice of cancellation because the insurance company is not required to notify the alternative employer when the named insured’s policy is cancelled.
The endorsement’s third paragraph states that this insurance does not satisfy the alternate employer's duty to secure its obligations under the workers compensation law. It also states that the insurance company does not file evidence of this insurance on the alternate employer’s behalf with any government agency. In other words, it specifies that the alternate employer may still be obligated to provide workers compensation coverage, regardless of this endorsement.
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Example: Marcy’s Fine Furs needs temporary help over the holidays and contacts Retail Help R Us. Retail supplies ten employees and assures Marcy that Retail provides workers compensation coverage for those employees. One of the employees is injured. Coverage is denied because Retail allowed its coverage to lapse. Marcy’s workers compensation must then pay for the employee’s injuries. |
The named insured still maintains the duty to notify the insurance company immediately if an injury occurs to a worker who might be covered even though that employee works for the alternate employer.