Employers Liability Insurance

Employers liability insurance, or employee liability insurance as it is more sometimes known, is one of the few legally required classes of insurance in the United Kingdom. The employee liability insurance policy is designed to protect the policyholder against claims in respect of their legal liability for injury or disease sustained by an employee during the course of their employment. Under the Employers Liability (Compulsory Insurance) Act 1969 all employers are required, by law, by to hold employers liability insurance. There are limited exceptions to this requirement and these include

Non-incorporated businesses employing only close family members e.g. spouse, son, daughter, grandson
Incorporated bodies, limited companies, where the only employee also owns more than 50% of the equity in the business. (from 28 February 2005)
Public service bodies and certain other prescribed organisations.

The current legal requirement for the limit of indemnity, the cover under the policy, is not less than £5 Million. In practice most insurers provide a limit of £10 Million as standard, although this may be increased by the employer if it is not felt to be adequate. Employers Liability Insurance in Practice In general employers liability cover is not available in “isolation” that is to say that insurers avoid providing cover for employers liability on its own. It is more usual for the cover to be arranged in tandem with public liability cover or as part of a package of insurances such as commercial combined insurance, office insurance or shop insurance. Employers Liability Claims It is in the nature of employers liability claims that whilst some claims incidences are immediately apparent to both employer and employee, there is the potential for claims to arise many years after an employee has left the employer or indeed the employer has ceased trading. This is of course a feature of claims relating to industrial disease.

The ability to correctly identify the correct insurer, or insurers, at the time or during the period that the injury took place has been a focus of attention over recent years. In 1999, the Employers’ Liability Code of Practice was adopted by many insurers From Spring 2011 the Employers’ Liability Tracing Office (ELTO) will collect information from member insurers and maintain a database of employers and the details of their employers liability insurance with the intention of creating a single archive for this information for the future. Initially, the information on the new database will include;

All policies taken out or renewed from April 2011
Policies that have been traced previously by the search office
All policies where a new claim is notified

Whilst insurer membership of ELTO is not mandatory the Financial Services Authority has made the publishing of the employee liability data a legal requirement for all insurers engaged in this business in the United Kingdom. Consequently a significant majority of insurers have joined the programme prior to the “go live” date. In future the Employers Reference Number (ERN) also referred to as the PAYE number will have to be collected for all employee liability policies. There are certain classes of employer who will not hold an ERN and these will be exempted accordingly.

Buying Employers Liability Insurance

Employer liability insurance is available from specialist liability insurance brokers and from a range of direct insurance companies operating across the United Kingdom. Increasingly clients are able to obtain quotations and immediate cover from a wide range of web sites, in addition to the traditional outlets of the high street insurance broker. The premium for employee liability cover is directly based on the activities undertaken by the employees concerned and how much of that work is undertaken. The level of data collated over the years by insurers has developed a rating system for most trades and occupations that produces immediate quotations.

Who Requires Employers’ Liability Insurance and Know How It Helps

Every employer is responsible for the health and safety of the employees while they are at work. His primary duty is to establish a safe working environment so as to prevent workplace accidents. Despite taking appropriate preventive measures, if any employee gets injured, the injured has all the rights to sue the employer making him legally liable for the injury. In such cases, the employer needs to compensate the employees for costs of hospitalisation, along with the legal costs. Since accidents are inevitable at workplace, it is sensible on the part of the employer to purchase insurance that enables him to meet the costs of compensation.

Employers’ liability insurance protects businesses from liabilities. Let us discuss about this insurance and its benefits.

Who requires employers’ liability insurance?
Employers’ liability insurance is required by companies that employ people to work for their organization. Even if the company has only one employee, it still requires employers’ liability insurance. In Ireland, it is mandatory for every company to take employers’ liability insurance.

Most employers ignore this policy thinking that they do not have any employees. But, according to Health and Safety Executive (HSE) Ireland, any person becomes an employee of an organization, even if he enters into a contract of service or if the PAYE (pay as you earn) deductions are made from his wages or if the employer has a control over when and where the employee carries out his work.

Exemptions in taking the policy
Though employers’ liability insurance is mandatory for every company, there are a few exemptions. Public bodies like government departments and local authorities, police and health authorities, non-limited companies which have the owner or his family members as employees, sole traders and partnerships with only one employee, where he owns at least 50% of the issued share capital in the company, are exempted from taking compulsory employers’ liability insurance policy.

Level of cover required
As per the law, every employer must have employers’ liability insurance worth minimum of £5 million. If the risks and liabilities associated with the business are more, the company requires more cover. As many insurance companies automatically provide a cover of at least £10 million, there is nothing to worry about it.

Each employer will receive a certificate from the insurer after purchasing the policy. This copy should be displayed in the facility, making it visible to employees and the same needs to be present when asked by Health and Safety inspectors.

Things covered under employers’ liability insurance
Employers’ liability insurance covers all those claims of liabilities which are likely to come against the employer, say, when an employee meets with a fatal accident or suffers from an illness while working. By and large, the insurance covers expenses incurred by the injured, legal and hospitalization expenses.

Benefits of taking the policy
The benefits of taking this insurance are as follows:

• Serves the legal obligation: First and foremost, as employers’ liability is compulsory in Ireland, purchasing the same fulfils the legal requirement. Else, while failing to purchase insurance leaves you with huge fines of £2,500 for each day, failure to display the certificate may attract £1,000 fine.

• Guaranteed financial security: The insurance from a reputed insurance company protects you by offering a cover for a wide range of risks. Having taken this insurance, you need not worry about any costs in case any employee meets with an accident. Employers’ liability insurance, thus, saves businesses from becoming bankrupt.

• Financial assistance to employees: This insurance not only saves the employer from bearing the compensation amount, but also enables employees to have financial assistance in times of need. Purchasing employers’ liability insurance and displaying it in the office, imparts confidence and a sense of security in employees. It assures them that even though something goes wrong, the compensation helps them to meet the required costs.

Purchasing the insurance through a reputed insurance brokerage firm, which can effectively tailor it as per your company’s requirements, is advisable. Employers’ liability insurance is, thus, significant to employers as it not only protects them from financing liabilities, but also protects the employees by compensating for the expenses.