Employers Liability Insurance by sofiaie


									                                                 TSSA Reps Bulletin
                                                 Ref: H&S/076/Oct 2008

                   Employers’ Liability Insurance

Introduction                                     illness that they believe the employer
From 1 October 2008, the Employers'              is    responsible      for    may     claim
Liability (Compulsory Insurance)                 compensation from the employer. The
(Amendment) Regulations 2008 (SI                 Employers’       Liability    (Compulsory
2008/1765) remove the requirement                Insurance)       Act     1969      requires
for employers to retain their insurance          employers to have at least a minimum
liability certificates for 40 years. In          level of insurance cover against any
light of this change that was opposed            such      claims.         The    insurance
by the unions it considered an                   indemnifies the organisation against
opportune time to look at Health &               any claims for civil liability that may
Safety Executive (HSE) guidance on               arise as a result of injury and/or
the         ‘Employers’          Liability       disease, but will not cover fines under
(Compulsory Insurance) Act 1969.                 criminal law. Under the Employers'
The recent regulations also allow the            Liability     (Compulsory       Insurance)
certificate to be made available                 Regulations 1998 (SI 1998/2573) the
electronically. Under the Act, subject           minimum cover is £5 million.
to exemptions (see below), all                   Employers’ liability insurance is
employers are required to have                   supposed to enable employers to meet
employer's liability insurance, including        the cost of compensation for their
an up to date certificate. This is valid         employees’ injuries or illness whether
for a year and should be displayed in a          they are caused on or off site.
prominent position in the workplace or           However, any injuries and illness
made available electronically, provided          relating to motor accidents that occur
it is reasonably accessible to relevant          while employees are working may be
employees. There is a penalty of up to           covered separately by employers’
£1,000 for failure to display a valid            motor insurance.
certificate or refusing to make it
available to Health and Safety                   Public liability insurance is different. It
Executive (HSE) inspectors. Being                covers organisations for claims made
without insurance can cost an                    against them by members of the public
organisation up to £2,500 per day.               or other businesses, but not for claims
                                                 by employees. While public liability
What      is   employers’       liability        insurance is generally voluntary,
insurance?                                       employers’ liability insurance is
Employers are responsible for the                compulsory. Employers can be fined
health and safety of their employees             if they do not hold a current employers’
while they are at work. Employees                liability  insurance      policy     which
may suffer injury at work or they, or            complies with the law.
former employees, may become ill
later as a result of their work while in         Do employers need employers’
employment      with    an    employer.          liability insurance if employees
Employees /former employees who                  work abroad or the company is
have been injured or develop an                  based abroad?

If any employees are normally based            compensation.       For example, the
in England, Scotland or Wales                  policy will cover the specific activities
(including offshore installations or           that relate to the employer’s business.
associated structures) employers must          There are certain conditions which
have employers’ liability insurance.           could restrict the amount of money the
Under the law in Great Britain                 insurer might have to pay, which the
employers do not need employers’               employer cannot agree and their
liability insurance to cover any of your       insurer cannot impose. The employer
employees who are based abroad (eg             should make sure that the contract
if they are on secondment). However,           with their insurer does not contain any
they should check whether the law in           of these conditions.
the country where they are based
requires them to take out insurance or         An employer’s insurer cannot refuse to
take any other measures to protect             pay compensation purely because:
their employees.
If any employees are normally based            •   the employer has not provided
abroad but spend more than 14 days                 reasonable protection for your
continuously in Great Britain, or more             employees against injury or
than seven days on an offshore                     disease;
installation, under the law in Great           •   the employer does not keep
Britain the employer will need                     specified records or cannot provide
employers’ liability insurance to cover            the insurer with information from
them.                                              those records;
                                               •   the employer has done something
Which insurance companies can                      they told not to do;
sell employers’ liability insurance?           •   the employer has not done
Employers must use an authorised                   something they were told to do (for
insurer. If they do not, they may be               example, report the incident); or
breaking the law. Employers should             •   the employer has not met any legal
check that their insurer is authorised             requirement       connected      with
before taking out employers’ liability             protection of their employees.
                                               However, this does not mean that the
Authorised insurers are individuals or         employer can forget about their legal
companies working under the terms of           responsibilities to protect the health
the Financial Services and Markets Act         and safety of employees. For example,
2000.      The Financial Services              employers must carry out a risk
Authority (FSA) maintains a register           assessment that is suitable and
of authorised insurers. Whether a              sufficient, and take all reasonably
company is authorised can be checked           practicable measures to protect
by searching their register on                 employees and report incidents. If the
www.fsa.gov.uk or telephoning the              insurer believes that the employer has
FSA on 0845 606 1234.                          failed      to   meet     their    legal
Can an insurance policy contain                responsibilities for the health and
conditions?                                    safety of their employees and that this
If an employer takes out employers’            has led to the claim, the policy may
liability insurance, they will have an         enable the insurer to sue the employer
agreement with their insurer about the         to     reclaim   the    cost    of   the
circumstances in which they will pay           compensation.

Can the insurer make an employer                 minimum level of cover provided and
pay part of any claim for                        the companies covered by the policy.
compensation?                                    The employer must display a copy of
The insurer must pay the full amount             the certificate of insurance where
of any compensation agreed with the              employees can easily read it.
employee or former employee or
awarded to them by a court. The                  Since 1 October 2008 employers have
insurer cannot impose conditions                 been allowed to display the certificate
which      make      the      employer,          electronically.   Employers choosing
employee/former employee pay part of             this method need to ensure employees
any claim. However, the employer can             know how and where to find the
agree with the insurer that they will pay        certificate and have reasonable access
back to them part of any compensation            to it.
which they have paid to the                      Factors to consider include the
employee/former employee.                        availability of the chosen format and
How much cover do employers                      ensuring employees understand how
need?                                            to use it.          For example, this
Employers must be insured for at least           arrangement may be suitable where all
£5 million. However, they should look            employees have access to a computer
carefully at their risks and liabilities         as part of their job. If an employer has
and consider whether they need                   employees working in the Isle of Man,
insurance cover of more than £5                  Jersey, Guernsey or Northern Ireland
million. According to the HSE, in                as well as in England, Scotland or
practice, most insurers offer cover of at        Wales they can use the same
least £10 million.                               certificate in all locations. However,
                                                 they must check that this complies with
If a business is part of a group, a              any local requirements as well as the
policy for employers’ liability insurance        law in Great Britain.
can be taken out for the group as a
whole. In this case, the group as a              If employees work on offshore
whole, including subsidiary companies,           installations or associated structures,
must have cover of at least £5 million.          the employer does not need to provide
                                                 a copy of the certificate on every
Employers can have more than one                 installation. However, if an employee
policy for employers’ liability insurance.       asks to see a copy of the certificate,
However, the total value of the cover            the employer must provide one as
provided by the policies must be at              soon as possible and certainly within
least £5 million. Employers should               ten working days of their request. A
bear in mind that the £5 million                 copy can be provided electronically or
minimum level of cover includes costs,           by fax if this is easier.
so they may wish to purchase cover of
more than this.                                  Does the law apply to all
Does the employer need to tell                   All employers’ need liability insurance
employees        that    they      have          unless they are exempt from the
employers’ liability insurance?                  Employers’     Liability   (Compulsory
When the employer takes out or                   Insurance) Act.          The following
renews a policy, the insurer will give           employers are exempt:
them a certificate of employers’ liability       • most public organisations including
insurance. This must state clearly the               government     departments      and

    agencies, local authorities, police           relationship with the people who work
    authorities     and      nationalised         for the organisation and the nature and
    industries;                                   degree of control that the employer
•   health service bodies, including              has over the work they do.
    National Health Service trusts,
    health authorities, primary care              The following may help give some
    trusts and Scottish health boards;            indication of whether or not a person is
                                                  an employee under the Employers’
•   some other organisations which are
                                                  Liability (Compulsory Insurance) Act.
    financed through public funds, such
                                                  However, it is for the employer to
    as passenger transport executives
                                                  satisfy themselves of the status of the
    and         magistrates’       courts
                                                  persons working for them and if they
                                                  have any doubts, the HSE guidance
•   family businesses, ie if all of your
                                                  says they should seek legal advice.
    employees are closely related to
    you (as husband, wife, civil partner,         Employers may need employers’
    father,     mother,      grandfather,         liability insurance for someone who
    grandmother,              stepfather,         works for them where:
    stepmother,       son,      daughter,
    grandson, granddaughter, stepson,             •   they deduct national insurance and
    stepdaughter, brother, sister, half-              income tax from the money paid to
    brother or half-sister). However,                 the person(s) concerned;
    this exemption does not apply to              •   they have the right to control where
    family businesses which are                       and when such people work and
    incorporated as limited companies;                how they do it;
    or                                            •   they supply work materials and
•   companies employing only their                    equipment;
    owner where that employee also                •   they have a right to any profit
    owns 50% or more of the issued                    workers make although they may
    share capital in the company.                     choose to share this through
                                                      commission, performance pay or
Do       employers’     need      liability           shares in the company;
insurance for all the people who                  •   they require that person only to
work for them?                                        deliver the service and they cannot
Employers are only required by law to                 employ a substitute if they are
have employers’ liability insurance for               unable to do the work; or
people who they employ under a
                                                  •   such persons are treated in the
contract of service or apprenticeship.
                                                      same way as other employees, for
Whether or not they need employers’
                                                      example, they do the same work
liability insurance for someone who
                                                      under the same conditions as
works for them depends on the terms
                                                      someone else employed.
of your contract with them.           This
contract can be spoken, written or                Employers may not need employers’
implied. It does not matter whether the           liability insurance for people who work
employer usually calls someone an                 for them where:
employee or self-employed or what
their tax status is.         Whether an           •   those persons do not work
employer chooses to call a contract a                 exclusively for them (for example, if
contract of employment or a contract                  they operate as an independent
for services is largely irrelevant. What              contractor);
matters is the real nature of your

•   those persons supply most of the           One difficult area is domestic help. In
    equipment and materials they need          general, this will probably not need
    to do the job;                             employers’ liability insurance for
•   those persons are clearly in               people such as cleaners or gardeners
    business for their own personal            if they work for more than one person,
    benefit;                                   nor is this likely to be needed for
•   the organisation can employ a              employing a childminder. However, if
    substitute when they are unable to         a person is employed who works
    do the work themselves;                    solely for a particular household or
•   the organisation does not deduct           individual, it may be necessary to take
    income tax or national insurance.          out insurance to protect them.
    However, even if someone is self-          (* For more information on work
    employed for tax purposes they             experience see the Department for
    may be classed as an employee for          Children,    Schools    and     Families’
    other reasons and the organisation         publication Work experience: A guide for
    may still need employers’ liability        employers. You can find this at
    insurance to cover them.                   www.publications.teachernet.gov.uk.)

In some cases an employer will not             Do employers need to keep copies
need employers’ liability insurance for        of certificates of insurance which
volunteers or for:                             are out of date?
                                               Since 1 October 2008 there has been
•   students who work unpaid;                  no legal requirement for employers to
•   people who are not employed, but           keep copies of out-of-date certificates.
    taking part in a youth or adult            However, employers are strongly
    training programme; or                     advised to keep, as far as is possible,
•   a school student on a work                 a complete record of their employers’
    experience programme.*                     liability insurance. This is because
                                               some diseases can appear decades
Insurers will usually cover the above          after exposure to their cause and
under an existing employers’ liability         former or current employees may
policy, and there is generally no need         decide to make a claim against their
to inform the insurer if the employer          employer for the period they were
takes on any of the above. However,            exposed to the cause of their illness.
the employer should talk to their
insurer if they take on the above either       Employers that fail to hold the
for long periods, or if they are doing         necessary insurance details risk
work that is the company’s usual               having to meet the costs of such
business, bearing in mind the level of         claims themselves.
risk they may be exposed to during the
time they are working. It may be               As was said in the introduction, this
necessary to carry out a separate risk         change was opposed by trade unions.
assessment (eg for young workers) or           Whilst it is no longer necessary for
take special measures for those listed         employers to keep these records,
above.                                         TSSA would strongly urge them to do
                                               so. TSSA reps should consider raising
If an organisation does not currently          the matter with companies to ascertain
have any employers’ liability cover            their policy on maintaining these
they should talk to their insurer before       records.
taking on any of the above.

What are the penalties if employers              HSE publication: ‘Employers’ Liability
do not have employers’ liability                 (Compulsory Insurance) Act 1969 – A
insurance?                                       guide for employers’, available at:
The Health and Safety Executive                  http://www.hse.gov.uk/pubns/hse40.pdf
(HSE) enforces the law on employers’
liability insurance. HSE inspectors can          There is also an earlier (March 2002)
check that employers have employers’             HSE publication: ‘Employers’ Liability
liability insurance with an approved             (Compulsory Insurance) Act 1969 – A
insurer for at least £5 million. The             guide for employees and their
inspectors can ask to see the                    representatives’     available     at:
certificate of insurance and other
insurance details.
                                                 The information given here is for
Employers can be fined up to £2500               general guidance only and should not
for any day they are without suitable            be regarded as a complete or
insurance.                                       authoritative statement of the law.
                                                 Further help and advice may be
If employers do not display the                  obtained from the TSSA Helpdesk –
certificate of insurance or refuse to            0800 328 2673.
make it available to HSE inspectors
when they ask, they can be fined up to
Reps Action
Reps are advised to raise the issue of
the new regulations with employers to
find out how they are going to react to
them, particularly the length of time for
retaining records.        Reps should
oppose any employers seeking to
reduce the period for which they intend
to retain insurance records and refer
the matter to the relevant TSSA
Senior/Regional        Organiser        if
necessary. Reps should also seek to
establish whether companies are
going to make the documentation
available in electronic format. If they
are, Reps need to consider whether
this is appropriate for the company in
question, bearing in mind nature of the
workforce and access to the
information. Assurances should also
be sought for any future change to
company policy to be discussed with
the unions.

Acknowledgements           /     Further
The information in this Bulletin is
mainly based on a new (October 2008)


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