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What is Employers Liability Insurance?
Employers Liability insurance covers you in the instance that something happens to one of your employees when they are doing work under your instruction.
This could be at your place of work, or off premises depending on what their jobs is. Having this kind of insurance in place can give you peace of mind and also show your staff you are serious about their welfare.
It is a statutory requirement and failure to have this cover is liable to a fine, up to £2,500 per day. As an employer you are liable for injuries to your staff where there is a breach of duty at common law or under statute.
You are also required to display your certificate in a prominent position and they must also be retained for future reference.
You must take reasonable care to ensure the safety of your employees. You must also have:
• Safe premises and place of work
• Adequate plant and machinery
• Safe system of work
• Competent fellow employee
The basic policy indemnifies the employer in respect of his legal liability to pay damages to person’s under a contract of employment or apprenticeship with the insured, who have suffered injury or disease caused during the period of insurance and arising out of or in connection with the business, within the territorial limits.
The term ‘caused during the period of insurance’ is particularly important in the context of ‘long tail’ claims. In such a claim, the claim arises years after the employee has been negligently exposed to a damaging process or substance. Asbestos exposure, for example, can cause diseases such as mesotheliome, lung cancer and asbestosis.
Injury or disease must occur within Great Britain, Northern Ireland, the Channel Islands, the Isle of Man. The restriction is overridden in respect of employees temporarily overseas on business but insurers may insist on any legal action being brought within these territories.
Limit of Liability Clause
The insurers liability is usually limited to £10million (£5million for acts of terrorism) in respect of any one claim or series of claims arising out of one cause. This is inclusive of both the claimants costs and your own costs incurred by your insurers consent. Higher limits of indemnity can be arranged if necessary. It may be that depending on your structure and nature of the activities carried out, £10million is not sufficient. When obtaining increased limits of indemnity via an ‘excess layer’ policy it is important that the wording follows that of the primary policy to facilitate smooth claims handling.
The Business: The policy applies only to the business described in the schedule but is stated to include:
• canteens, sports and welfare organisations for the benefit of the insured’s employees and fire, security, first-aid and ambulance services
• private work carried out by an employee for any director, partner or senior employee of the insured (subject to the insured’s consent)
• the ownership, maintenance and repair of premises used in connection with the Business.
Employees: The basic indemnity applies in respect of liability to ‘persons employed under a contract of employment or apprenticeship with the insured’. It does not apply to persons such as an independent contractor, engaged under ‘contract of service’. That said, what constitutes an Employee is ever widening in all circumstances has as much to do with who controls the employee, rather than who is paying for their work. The tax status of the individual is irrelevant.
Frequently Asked Questions
The short answer is yes. Due to the Employer’s Liability (Compulsory Insurance) Act 1969, it is a legal requirement for all businesses that have more than 2 employee’s. Not having the cover in place can result in fines up to £2,500 a day, until you eventually get the cover.
Any business with more than 2 employee’s needs Employers Liability cover. No matter the industry, the cover is there to help you should anything happen to your employees whilst they are under your employment.
The legal minimum requirement is £5million. Depending on your size of business this can increase from £10million and beyond.
A simple way to look at the difference between employer’s and public liability insurance, is that employer’s covers people inside the business, and public covers people outside the business.
Meaning that everyone who doesn’t fall into the ’employee’ category, is then covered by public liability insurance.
This is not a legally required additional cover, but highly recommended if you are working with the public or other businesses/suppliers. See our public liability page for more on this kind of cover.
It’s a legal requirement if you have employees (full time and part time), unpaid volunteers, students/trainees, interns/apprentices, freelancers or temporary workers that you have cover in place of a minimum of £5million.
When it comes to contractors, they often have their own insurances in place, and do not need cover if they do not work exclusively for your business.
Subcontractors however might need cover, depending on who’s tools/equipment they are using. If they are using your tools/equipment then they would fall into the category of requiring cover.
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Apart from the customary conditions (claims notification, observance of conditions etc) the following should be noted:
Liability Under Statute
There are regulations, which you have a duty to comply with and we have listed a number of key ones below. The list is not exhaustive and may or may not apply to your business. If you are not familiar with, or implementing those that apply, you are trading in breach of your statutory obligations which may be endangering your employees and leaving you exposed to fines, damages and claims.
- Health & Safety at Work regulations,1974
- The Factories Act, 1996
- The Control of Substances Hazardous to Health Regulations,1999
- The Control of Asbestos at Work Regulations, 2002
- Electricity at Work regulations, 1989
- Noise at Work Regulations, 1989
- Management of Health & Safety at Work Regulations, 1999
- Workplace (Health, Safety and Welfare) Regulations, 1992
- The Personal Protective Equipment at Work Regulations, 1992
- The Manual Handling Regulations, 1992
- The Health and Safety (Display screen equipment) Regulations, 1992
- Lifting Operations and Lifting Equipment Regulations, 1998
- Confined Spaces Regulations, 1997
- The Gas Safety (Installation and Use) Regulations, 1998 and The Work at Height Regulations, 2005
- Corporate Manslaughter and Corporate Homicide Act, 2007.
Health and Safety at Work Regulations Act 1974 – legal defence costs; Unsatisfied court judgements; retrospective cover; indemnity to other parties; injuries to working partners; court attendance costs.
Liability does not apply in those circumstances where the Road Traffic Act insurance requirements apply. Liability does not apply in respect of work on offshore installations or whilst in transit to or from the installation. The policy does not provide cover for liability in respect of liquidated damages, penalty clauses, fines, aggravated, punitive, or exemplary damages.
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A Fair Presentation of the Risk
At the heart of insurance contracts is an obvious truth: you have an enormous advantage over the insurer. You know all about your business, its history, processes, people and management, but the insurer knows nothing – other than what you tell them.
You have a statutory duty to make a fair presentation of the risk. You must tell the insurer:
• Every material circumstance which you know or ought to know and/or
• Sufficient information that would cause the insurer to make further enquiries, if neccessary, to review those material circumstances
• You are deemed to have the knowledge of the company’s senior management.
• You are deemed to have the knowledge of the person arranging the insurance (who is deemed to be a senior manager under statute).
• Anything that can be discovered by a reasonable search.
A failure to make a fair presentation of the risk gives the insurer various remedies, depending upon the nature of the failure, from avoiding the contract and not paying claims to modifying the basis of settlement.
Examples of Misrepresentation
It is often easier to demonstrate the consequences of risk presentation failure by example rather than theory. Here are some real life examples of typically forgotten or unrevealed material facts which later caused huge problems and repudiated claims:
A reprocessing plant did not reveal a series of small fires during their insurance year.
Following repeated false alarms, a retailer didn’t reveal that Police Response had been withdrawn.
A restaurant omitted to reveal repeated minor floods from an upstairs nightclub.
A construction company didn’t reveal potential employee claims recorded in their accident book.
A company failed to reveal written warnings to an employee over repeated dangerous driving.
A company failed to reveal that it had been ‘struck off’ by Companies House and was trading as a new legal entity under a different designation.
Compiling the Risk Presentation: an ongoing process
The compilation of risk information for presentation to an insurer might be thought to be simply contained in a proposal or risk presentation form, however, such forms are not exhaustive and cannot take account of circumstances which change beyond their
compilation. Moreover, merely referring insurers to your website or dumping data is not making a fair presentation of the risk. ’Fairness’ is a subjective test but it would certainly involve simplicity, clarity and relevant selection.
Ongoing communication is vital, because the duty to disclose material circumstances is ongoing throughout the insurance year and at renewal of the insurances.
It is not possible to overstate the importance of researched, adequate risk presentation – there have been countless legal disputes, repudiated claims, ruined businesses and lives arising from the simple failure to reveal all the facts to an insurer. A failure to present risk adequately is a bigger risk than the risk you present.
It doesn’t matter that the failure is innocent, something overlooked, forgotten or discounted as unimportant – it might be important to the insurer, in which case it must be revealed.
Should there be anything not yet disclosed, or that you are unsure would influence your insurers about this insurance tell your broker/insurer immediately.
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