What Is an Alternate Employer Endorsement?

An alternate employer endorsement extends workers' compensation coverage to other companies with whom the primary insured may do business. An alternate employer endorsement lists other companies that are to be included in the policy’s coverage within the policy’s endorsement schedule.

It is often used when businesses utilize contracted employees through temporary employment agencies or subcontractor vendors in order to avoid workers' compensation lawsuits.

Key Takeaways

  • An alternate employer endorsement extends workers' compensation coverage by including additional companies to the policy's endorsement schedule.
  • An alternate employer endorsement is a useful tool to protect a business from lawsuits while contracting employees from a temporary employment agency or subcontractor.
  • The temp agency or subcontractor agency remains the worker's primary employer, with coverage that applies only to work performed by the temporary workers under that contract or for the duration of that project.

How Alternate Employer Endorsements Work

Businesses may find themselves short-staffed on occasion and may seek out the services of temporary employment agencies to fill the gaps. Workers employed through a temporary employment agency are covered under the workers' compensation policy that the agency has purchased. When the employee is hired out to an outside firm, the firm that hires the employee will seek an alternate employer endorsement.

This type of workers' compensation arrangement will shield the contracting business from lawsuits as the result of any injury or disability the temporary employee may suffer while on the job.

Endorsement Schedule

The alternate employer endorsement covers injury sustained by employees during their temporary or "special" employment by the alternate employer listed in the endorsement schedule. The schedule must indicate the state in which the temporary workers are employed. The temporary employment agency remains the worker's primary employer, and the client is insured only while the temporary worker is assigned to it. If a contract or project is specified in the schedule, then coverage applies only to work performed by the temporary workers under that contract or for the duration of that project.

Alternate Employer's Obligations in the Claims Process

When an alternate employer is added to a policy’s endorsement schedule, the alternate employer is often required to assist in any claims investigations. This typically means reporting any injuries that a temporary employee may suffer or ensuring that the employee is given proper medical treatment when the injury is suffered. They must also provide any documentation related to the injury to the policyholder. However, if the policy is canceled for any reason, the insurance company is not obligated to tell the alternate employer because the temporary employment agency remains the primary party on the policy.

Example of an Alternate Employer Endorsement

A delivery company expects that it will experience a higher volume of workload over the holidays, so management contacts an employment agency to hire a temporary worker to help out during this busy time. In order to protect itself from lawsuits that may arise from hiring the temporary worker, the delivery company asks the agency to insure it as an alternate employer in the agency's workers' compensation policy.

Several weeks into the job, the temporary employee drops a package on his foot and has to go to the emergency room. The delivery company fully complies with the claims investigation and submits all required incident reports and documents on time. The employee will be covered under the agency’s workers' compensation policy, and thus cannot make a claim against the delivery company’s insurance policy.