What Is an Alternate Employer Endorsement?

An alternate employer endorsement extends existing workers' compensation coverage to other companies with whom the primary insured may do business. An alternate employer endorsement lists other companies 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 and may seek the services of temporary employment agencies. Workers employed through a temp agency are covered under the workers' compensation policy that the agency has purchased. When the employee is hired out to an outside company, the client needing the employee's services will seek an alternate employer endorsement.

This type of workers' compensation arrangement will shield the contracting business from lawsuits resulting from any injury or disability the temp 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 temp workers are employed. The temporary employment agency remains the worker's primary employer, and the client is insured only while the temp worker is assigned to it. If a contract or project is specified in the schedule, then coverage applies only to work performed by temp 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 a temp employee may suffer or ensuring the employee is given proper medical treatment following an injury. They must also provide to the policyholder any documentation related to the injury. 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 higher volumes over the holidays, so management hires a temp worker through an employment agency. To protect itself from lawsuits, the delivery company asks the agency to insure it as an alternate employer under the agency's workers' compensation policy.

Several weeks into the job, the temp employee drops a package on their foot and requires medical care. 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.