1. THE ALTERNATE EMPLOYER ENDORSEMENT
DANGER LURKS--
THE ALTERNATE EMPLOYER ENDORSEMENT
Presented to: SRMC – Nashville, TN
Don Malecki, CPCU
Malecki Deimling Nielander & Associates

2. The Obvious What is the Alternate Employer Endorsement?
AKA - WC A

3. Special Employer Relationships
Who is the general employer?
Who is the special employer?
When does the special employer relationship exists?
A general employer is the employer who lends one or more of its employees to another employer
A special employer is the one who borrows one or more employees from the general employer
A special employer relationship exists when one employer (general) lends one or more employees to another employer (special employer).

4. Dual Versus Joint Employment
Dual = General Special Relationship
Joint = Serving Two Employers
A general-special relationship also is referred to as a dual employment because services are performed separately for the general and special employer
A jont employment relationship is where services are performed for the mutual benefit of two employers. A PEO is an example.

5. Examples - Dual Employment Relationship
A general contractor rents a crane with an operator
A watercraft owner hires a food catering service to when the craft is touring with passengers
A manufacturer owns several companies and it shares employees with their other companies
The GC is the special employer and the crane rental company is the general employer. It is necessary that the special employer is able to control the work of the lent employee.
The food catering service is the general employer and the owner of the vessel that uses it for tours is the special employer.
Question you are assuming that a contact does exits

6. Steps In Establishing the Special Employer Relationship
Implied or Expressed Contract for Hire
Work for benefit the special employer
Right to control
There must be contract of hire and the employee(s) must be aware of the fact they are going to work for a special employer.
The work to be performed by the general employer’s employees must be for the benefit of the special employer.
The special employer has the right to control the general’s employee and, in fact, was controlling the employee at the time fo injury.

7. Steps In Establishing the Special Employer Relationship
Most difficult element is control
Control cannot be determined until after an injury in most cases
Because control cannot be determined until after an injury occurs, it is absolutely essential that insurance be put into place before work commences.

8. Case In Point
Robert J. Ray and Amelia Ray v. Marcus Thomas, 07- CV-1076 (U.S. Dist. Ct. W.D. Ark. 2009)

9. Nature of Protection Desired By Special Employer
Inability of the general employer’s employee to sue for injuries
Waiver of subrogation by WC insurer
When a general employer’s employee is injured while under the control of the special employer, the special employer wants protection if the employee decides the sue the special employer.
The Alternative Employer Endorsement provides direct coverage and a waiver of subrogation provides indirect protection.

10. Protection For Special Employor
Two Approaches:
Traditional Way: Hold Harmless Agreement, Waiver of Employer Immunity, Waiver of WC Subrogation and Additional Insured Endorsement
Alternate Employer Endorsement

11. The Alternate Employer Endorsement
A/K/A WC A
Applicable with WC and EL Policy
Produced by the NCCI
Who is ncci

12. What the Endorsement Does
Special employer equivalent to a named insured
Who Pays Benefits
Primary and Noncontributory Basis
Closing the Gaps
When the endorsement is issued, it is as though the WC policy was issued to the special employer.
The general employer’s insurer pays the benefits initially at least, Most probably, the special employer pays for the premium representing the payroll of the borrowed employee.
The benefits paid by the general employer’s insurer is on a primary and noncontributory basis, As if no other insurance applied.
What also is important is that the special employer obtain immunity from suit by the injured employee.

13. Activating the Endorsement
The schedule of the endorsement must be completed with the name and
address of the Alternate Employer, unless the named insured is in the
business of providing temporary workers.
In that event, the word “all” or “any” can be inserted under the endorsement’s
Schedule

14. Activating the Endorsement
Coverage applies only to the state of temporary or special employment shown
Item 3.A. of the WC policy’s Information Page.

15. NCCI – Examples of Special Employers
The named insured of the WC/EL Policy is a contractor who is to perform work for an oil company.
The oil company wants to be protected in the event any claims are brought against it by the contractor’s employees for work-related injuries.
Remember that there needs to be a contract where the general employer’s borrowed employees are aware of the fact that they may be under the oil company’s control.

16. NCCI – Examples of Special Employers
A property management company is required by the property owner to make it an alternate employer in the event of any claims made against the owner for work-related injuries to the property management company’s employees.
Remember that the owner willl have to have control over the empoyees if the general – speicail employer relationship is to apply.

17. NCCI – Examples of Special Employers
A temporary office staffing agency is required by its customer to show it as an alternate employer under the agency’s workers compensation and employers liability policy.

18. Other Potential Coverage Uses?
Longshore Harborworkers Compensation Act
Maritime Endorsement
Court case wc with flh hard to differentiate long shore could apply

19. Why Endorsement Not Issued
Not requested
Refusal by underwriter
Not available
Sometimes underwriters may say no to the issuance of this policy because they do not understand it. Remember that they are charging the general employer the payroll of the employee being lent to the special employer. It is not like the insurer is giving away any coverage. However, ithe endorsement may not be available in State Fund states like Ohio.

20. Alternative to This Endorsement
Obtain Hold Harmless Agreement
Waiver of Employer Immunity
Waiver of WC subrogation
Additional Insured Endorsement
Contractual liability coverage with no limitation endorsements

21. A Question of Coverage
The primary purpose of this endorsement is to protect the special employer?
Is the primary purpose of this endorsement to
protect the special employer? No. Secondary. Injured Worker is first.

22. A Question of Coverage
Isn’t it true that the contract of hire is between the general and special employer?
Isn’t it true that the contract of hire is between
the general and special employer? No. Spec. Employer and Employee

23. A Question of Coverage
Is NCCI to the WC policy what ISO is to the CGL policy?
Is NCCI to the WC policy what ISO is to the CGL policy? Yes.

24. A Question of Coverage
Is the endorsement applicable for employee leasing firms?
This endorsement can be used for leasing firms? yes. It probably can
But not PEOs.

25. A Question of Coverage
Without an additional premium, is an insurer’s refusal to issue the endorsement justified?
Answer: No Without an additional premium, is an insurer’s refusal
to issue the endorsement justified? Gen. Empl. Is being charged.

26. The Question Left
Don, is there a question left for this subject

27. Any Additional Questions

28. Current Ramblings Malecki on Insurance ww.maleckioninsurance.com
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February and March 2011 issues of Malecki on Insurance features the Alternate Employer Endorsement and other articles.