Background

It is estimated that accidents in the workplace account for 40% of all recorded personal injuries. English law places many common law and statutory duties upon employers to protect the safety of their workers. The rise in claims for personal injuries during the early 1900’s led to the creation of employers’ liability insurance. Unfortunately, it transpired that the least safety conscious employers were the ones most likely not to insure against liability. This resulted in many injured employees, having validated claims against their employer, finding these judgements were worthless, as the employers were not backed by employers’ liability insurance. Subsequently, the Employers’ Liability (Compulsory Insurance) Act 1969, (EL(CI) A 1969) which became effective on 1st January 1971, made it compulsory for employers to insure against liability to employees. This allows employees who are injured due to an employer’s negligence to claim compensation even if the company goes into receivership or liquidation. For accidents/incidents occurring on or after 29th January 2007 the National Health Service (NHS) have been able to claim for the costs of hospital treatment (including ambulance costs) where personal injury compensation has been paid following an accident in the workplace.

What is an Employee?

The EL(CI) A 1969 only requires that you have employers’ liability insurance for those people who you employ. Some people you may consider self-employed may also come under the requirements of the law. The terms of the contract you have with a person will determine whether you will be required to have employers’ liability insurance for them. The contract may be written, spoken or implied. It is irrelevant whether you call someone an employee or self-employed or what their tax status is and whether you call the contract a contract of employment or a contract for services is also irrelevant. What actually matters is the nature of the relationship you have with the people who work for you and how much control you have over the work they do. There are no rules to determine what constitutes an employee for the purpose of employers’ liability insurance but the following may be helpful. Legal advice should be taken if you are in any doubt.

Generally speaking, you may require employers’ liability insurance for someone who works for you if:

• You deduct income tax and national insurance contributions from the money you pay them.
• You have the right to determine when and where they work and control how they do it.
• You supply most of the equipment and materials.
• You have a right to any profit your workers make although you may share this with them through commission payments, bonuses, performance pay or shares in the company.
• You require that person only to deliver the service and they cannot employ a replacement if they are unable to do the work.
• They are treated the same as other employees. For example, if they do the same work under the same conditions as someone you employ.

Legal Requirements

Every employer conducting any business in Great Britain (with a few exceptions) is required to take out and maintain insurance cover against liability for disease or bodily injury sustained by his or her employees arising out of their employment in Great Britain. It is a criminal offence for an employer to fail to take out the required insurance. Criminal liability, in the case of a company, may be extended to any officer of the company who was responsible for the default.

To guard against failure to insure, the EL(CI) A 1969, sets up an inspection regime. The Health & Safety Executive (HSE) is responsible for enforcing the law on employers’ liability insurance and their inspectors will check that you have insurance in place with an approved insurer for at least £5 million. They will ask to see your certificate of employers’ liability insurance and other details of your insurance policy (such as the schedule) to prove cover is/was in place. A fine of £2,500 can be made for each day that you do not have the required insurance in place. Failure to display your certificate of employers’ liability insurance or not making it available to HSE inspectors can result in a fine of £1,000.

An insurance company that is authorised to conduct insurance business of the class required must issue the policy or the policyholder risks not being insured. The policy must not provide cover that is less than is required by the Act (EL(CI) A 1969). Currently, the minimum level of cover required is £5 million ‘in respect of claims relating to any one or more of his employees arising out of any one occurrence’ (this is laid down in the Employers’ Liability (Compulsory Insurance) General Regulations 1998). In reality, most authorised insurance companies provide cover of at least £10 million.

Your Certificate of Employers’ Liability Insurance

Within 30 days of inception of a policy, the insurance company must provide the employer with a certificate of employers’ liability insurance in a statutory format. The certificate must state

• The name of the insurer,
• The name of the policyholder,
• The start date of the insurance, and
• The date of expiry of the policy.

The certificate, or a copy of it, must be displayed at each place of business at which the employer operates and must be produced for inspection to the Health & Safety Executive (HSE) or an inspector appointed by the Department of Trade & Industry. For policies in force on or after 31st December 1998 a copy of the certificate of employers’ liability insurance must be retained for a period of 40 years. However, for your own protection you should retain records of previous insurance policies in case employees claim for illness or injuries in the past. This is because claims for diseases and injuries can be made many years after the cause of the disease or injury. An electronically stored certificate will usually be sufficient if the policyholder prefers this method of storage.

How can I reduce the amount I pay for Employers' Liability Insurance?

Demonstrating to your insurer or potential insurer that you and your business take a responsible attitude towards preventing claims is key to obtaining real and lasting reductions in your employers' liability insurance premiums. Click here for details of our risk review service offered through a carefully selected and experienced partner.

 

For more information or to obtain a quotation for employers’ liability insurance please call us now on

01438 723755.