Liability insurance exists to help companies manage risks and claims for losses when things go wrong, as however safe and careful you are, accidents will happen. Insurance is therefore a valuable safety net.
Businesses are often confused about the different types of insurance available, and more importantly about what types of insurance they need to have. This article looks at two of the most important types which protect businesses, their employees, and their customers – Employers’ Liability Insurance and Public Liability Insurance.
Employers’ Liability Insurance is needed because employers are responsible for the health and safety of their employees whilst they are at work.
Employers’ Liability Insurance is there to protect both employers and employees. It protects employees (including the owner if they are an employee of their own company) from any injury, illness, or disease sustained as a result of their work whilst they are employed by the business.
It protects the employer because if an employee makes a claim against their business because of an injury that was incurred in the workplace, or because of an illness or disease which they had as a result of their work, the claim is made against the Employers’ Liability insurance policy that was in place at the time, rather than against the employer personally.
Employers’ Liability Insurance covers employers against liability for disease or injuries to their employees during their employment.
So, if an employee gets injured whilst at work, for example, if they tripped over some files in the office or if something fell on them, then they might try to claim compensation if they felt it was the fault of the business rather than their own fault. Another example would be if an employee or former employee became ill as a result of their employment, such as using certain chemicals or products, then they might try to claim compensation from the business.
Employers’ Liability Insurance enables you to pay your employees any compensation as well as legal fees for their injuries or illness whether it was caused on or off-site. However, any injuries or illnesses relating to motor accidents that take place whilst your employees are working for you may be covered separately by your motor insurance.
Under the Employers’ Liability (Compulsory Insurance) Act 1969, most employers must get Employers’ Liability Insurance as soon as they become employers. This is because it is a legal requirement for businesses to have Employers’ Liability Insurance if they employ one or more people.
This applies to all types of workers. So, if your employees work from home, are casual or seasonal, temporary or even if they are volunteers, you still have to have Employers’ Liability Insurance. If you control when, where, and how somebody works for you and you are responsible for their actions then you must have it in place. However, there are a few exceptions to this requirement.
Businesses may not need it if they only employ close family members (for example, small family businesses). However, all of your employees must be closely related to you for this to be the case, as any of the following relatives: husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, brother, sister, half-brother, and half-sister. In order for this to apply your business cannot be set up as a limited company.
Employers may also be exempt if they only employ somebody who is based abroad. Under the law, if any of your employees are normally based in England, Scotland or Wales then you must have Employers’ Liability Insurance. This includes offshore installations and associated structures. However, you do not need it if your employees are based abroad, for example on secondment. But, you need to check the law of the country in which they are working in, as they may require you to take out insurance or other measures to protect your employees. Please note that if any of your employees are normally based abroad but spend more than 14 days continuously in Great Britain or more than seven days on an offshore installation then you must have Employers’ Liability Insurance for them.
Another exemption is if your company only employs you, you are the owner and you own more than 50% of the shares in the business.
Finally, most public organisations including government departments and agencies, local authorities, police authorities, and nationalised industries are exempt, as are health service bodies including National Health Service trusts, health authorities, primary care trusts, and Scottish health boards, and some other organisations which are financed through public funds such as passenger transport executives and magistrates’ courts committees.
But these are the few exceptions – generally speaking if you are a business, you must have Employers’ Liability Insurance.
The policy must cover employers for at least £5 million (that is the legal minimum) and must come from an authorised insurer. However, you need to consider all of your risks and liabilities and ask whether the legal minimum is enough. It is worth noting that the £5 million minimum level of cover includes costs. For most businesses, it is not enough and they choose at least £10million of cover. In fact, a lot of insurers offer £10million cover as the minimum.
Some businesses are part of a group. If this is the case, an Employers’ Liability Insurance can be taken out for the group as a whole, with the group as a whole including subsidiary companies having cover of at least £5 million.
You can have more than one policy, but the total value of the cover provided must be at least £5 million.
When you take out or renew an Employers’ Liability Insurance policy, you will receive a certificate. This will state the minimum level of cover provided and the companies covered by the policy.
All employers must display their Certificate of Employers’ Liability Insurance wherever employed persons are covered by the policy so that their employees can easily read it. Since 1st October 2008 employees have been allowed to do this electronically, but employees must know how and where to find the certificate and have reasonable access to it.
You can use the same certificate for employees working in Northern Ireland, the Isle of Man, Jersey, and Guernsey as you would in England, Scotland and Wales, but you must check that it complies with any local requirements. You do not need to provide a copy of the certificate in every offshore installation or associated structure, but you must provide a copy of the certificate if one of your employees asks to see it as soon as possible and within ten days. You can do this electronically or by fax.
Employers can be fined £2,500 for every day that they are not properly insured and £1,000 if they do not display their insurance certificate or if they refuse to show it to inspectors when they are asked.
Although there is no legal requirement for you to keep copies of out-of-date certificates, it is strongly advised that you do, as some diseases might not appear until decades after the employee worked for the business.
It is worth remembering that Employers’ Liability Insurance does not mean that employers can forget about their legal responsibility to protect the health and safety of their employees and that if your insurer believes that you have not carried out a risk assessment that is suitable and sufficient, or that you have not taken all reasonably practicable measures to protect your employees and report incidents then you could be liable for the cost of the compensation.
Public Liability Insurance is different from Employers’ Liability Insurance. Whereas Employers’ Liability Insurance is compulsory, Public Liability Insurance is generally voluntary. However, just because it is not compulsory does not mean that it is not essential.
Unlike Employers’ Liability Insurance, it does not cover businesses for claims made against them by their employees. What it does cover, however, is claims made against businesses by members of the public (such as customers) and other businesses for accidental damage caused to property or individuals.
If people visit your home or work premises or if you visit other people’s home or work premises, you need public liability insurance. This is needed to protect both you and either the people who visit you or the people you are visiting.
For example, if a client came to visit your business and fell down your stairs or tripped up over your carpet, they would be able to claim against your public liability insurance.
If you were a tradesperson, for example, an electrician or a plumber, and so you were in somebody’s home carrying out some work, and you flooded their kitchen so they needed new carpet, or they tripped over some cable you’d left on the floor and broke their leg, or broke a window as you carried a piece of timber, they would be able to claim against your Public Liability Insurance.
If you are hiring a company or individual to come and work in your business premises or home you should always ask to see their Public Liability Insurance.
There is no set limit of cover for Public Liability, but most insurance companies offer cover from £1 million. Public Liability Insurance for small and medium enterprises (SMEs) usually has a maximum limit of £10 million.