Employers Liability Insurance
By: David J Burton
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.