Employer’s Liability Insurance – How to protect your business from financial liability

Rix & Kay are experienced in advising and defending employers in respect of liability claims. This specialist area of law is often required where claims are brought against business owners who have failed to take out employers’ liability insurance, or whose policy has lapsed before an accident involving one of their employees.

Needless to say, uninsured claims are a significant risk which can expose a business to huge financial liability so it maybe sensible to seek professional advice if you are facing a claim that may not be covered by your insurance.

Before you do, the following guide on Employer’s Liability Insurance may answer some of your questions.

What is Employers Liability Insurance?

• Employers Liability Insurance covers a business against the costs of compensation claimed by an employee.
• Employers Liability Insurance has been compulsory since 1972.
• It followed the introduction of The Employers’ Liability (Compulsory Insurance) Act 1969, which was designed to ensure employees health and safety whilst at work.

How much should I be insured against?

• Under the Act, you must be insured against liabilities of at least £5 million.
• The £5 million minimum level of cover includes legal costs, so you should consider whether this is sufficient.
• Most insurers offer cover of at least £10 million.
• If your business is part of a group, insurance can be obtained for the group as a whole but it must have cover of at least £5 million.

Why do I need Employers Liability Insurance?

• If you are an employer, you are legally obliged to have employers’ liability insurance.
• If you do not have it, you can be fined up to £2,500 for any day without it.

Are there any exceptions?

Yes, under the Act some businesses do not require employers’ liability insurance such as:

• Public organisations, such as government departments, local authorities, and police authorities.
• Health Service bodies
• Companies without any employees, just an owner.
• A family business employing only family members.

What does it cover?

• Employers’ liability insurance covers the cost of compensation claims brought by employees and former employees, who are injured at, or become ill through work.
• This includes historic claims, such as asbestos exposure or noise induced hearing loss.

Are Motor Accidents covered?

• This is an area which can lead to some dispute between the relevant insurers, as they try to avoid liability but in general, any injuries and illness relating to work related motor accidents tend to be covered separately by your business’ motor insurance policy, even though they may have occurred during employment.

Can my insurance policy contain conditions?

• The policy will contain an agreement with your insurer about the circumstances in which they will pay compensation. For example, it may cover specific activities relating to your business.
• There may be certain conditions which could limit the amount of money your insurer might have to pay.
• To comply with the agreement, it is important that you meet your legal responsibilities to protect the health and safety of your employees, such as carrying out suitable and sufficient risk assessments, taking all reasonably practicable steps to protect your employees and reporting incidents.
• If your insurer believes that you have failed to meet your legal responsibilities for the health and safety of your employees and that this has led to the claim, the policy may enable the insurer to seek redress against you.

How do I trace a previous Employers’ Liability Insurer?

• In the event of a historic claim being brought against you, such as one for mesothelioma, you will need to check all of your business’ archives for details of any previous insurers.
• If you cannot find any records of whom the insurers were at the time or even if there was any insurance, you can carry out a search of the Employers Liability Tracing Organisation (ELTO) data base. This should reveal the relevant insurer from 1972 onwards and sometimes, even in cases before.

How do I reduce my Claims Risk?

• You can minimise the risk of a claim by ensuring that you have robust health and safety practices in place. These make for a great first line of defence, as they reduce the chance of accidents and illness.
• It is also essential that you know the regulations governing your industry and carry out regular risk assessments with your employees.
• Ensure that your insurance policy is in place and valid.

Contact us

Dispute Resolution specialist at Rix & Kay is noted in Legal 500, the leading independent legal directory reporting on lawyers capabilities, for defending insurance claims. You can email Richard at richardludlow@rixandkay.co.uk.