What Are the Rules About Employers’ Liability Insurance in the UK?

As an employer, you are responsible for the health and safety of your employees. So, if something goes wrong, having liability insurance is essential to allow you to cover costs where you are liable for an employee’s injury or illness. If you do not have liability insurance, you could potentially be fined £2,500 for each day you are without it. Therefore, it is vital that you fully understand Employers’ Liability insurance and why it is a legal requirement.

What is Employers’ Liability Insurance? 

Employers’ Liability insurance is compulsory insurance as soon as you become an employer. So, when your employees carry out their work in the UK, you will need insurance unless you meet one of the exemption criteria.

Employers’ Liability insurance is necessary when your employees are under a contract of service or when they are an apprentice. Where you have control over your staff regarding what they do, you are likely to require insurance. This includes, for example, volunteers and temporary employees.

Employers’ Liability insurance can be a single policy or more than one policy that covers you for a total of at least £5 million. This figure can cover a group of businesses where yours is part of one. However, you may need to have cover for more than £5 million depending on your business’ risks and liabilities. Notably, many policies cover a minimum of £10 million. 

Exceptions

Additionally, there are exceptions where you do not need to obtain Employers’ Liability insurance. This is where the only person or people you employ work abroad. Alternatively, your employees may be close family members such as your:

• wife or husband;
• civil partner;
• mother or father;
• grandmother or grandfather;
• step-mother or step-father;
• daughter or son;
• stepdaughter or stepson;
• sister or brother; or
• half-sister or half-brother.

However, you are not exempt if these employees are part of a family business incorporated as limited companies. Also, where your employee normally works abroad but comes to the UK for more than 14 days in a row or for more than seven days in a row when on an offshore installation, you must have Employers’ Liability insurance. Further, where your only employees are based abroad, and you do not need insurance for them, you should note that the law in the country they are working in may require you to have some other form of insurance.

Most public organisations do not require Employers’ Liability insurance, and neither do health service bodies and some public-funded organisations.

Why Does an Employer Need Employers’ Liability Insurance?

During the course of your business, there may be times when an employee or former employee becomes unwell. It may be a result of their work with you or where they have an injury as a result of it. In these situations, it is essential to have Employers’ Liability insurance.

Legally, you are responsible for the health and safety of your employees. Therefore, if they believe you are responsible for their injury or illness, the insurance allows you to pay them compensation. In addition, insurance can also cover the cost for you to defend any case against you regarding the cost of the claim and legal expenses.

You must ensure that your Employers’ Liability insurance is on display in a place where your employees can easily see it. This can be in electronic format. There is no requirement to put your insurance certificate on display on each offshore installation or associate structure where you have employees working on these. However, if they request to see it, you must let them see it as soon as possible with a maximum of ten working days. You must also show it to inspectors who request it. If you do not, you could receive a fine of up to £1000.

Notably, liability insurance doesn’t cover any illness or injury resulting from motor accidents whilst at work. Where this cover is necessary, you should seek insurance cover from a separate motor insurance company. Likewise, Employers’ Liability insurance does not protect you when a member of the public claims against you. Instead, public liability insurance will cover you. 

What Conditions Are Acceptable?

You should tailor your insurance to the activities of your business. However, certain conditions are not acceptable for you to amend to avoid liability. Your policy cannot detail that the insurer will not pay compensation based upon your failure to:

• put in place reasonable protection against disease or injury;
• give the insurer information from specified records;
• comply with something asked of you, such as admitting fault or reporting an accident; or
• meet a legal requirement regarding protecting your employees.

However, where your insurer believes that the reason the employee has made a claim is because you have not met your legal health and safety requirements, they may be able to sue you. This allows them to reclaim the compensation cost they paid to you for the employee.

Whilst you can agree to pay your insurer back any compensation they have paid out for you, they cannot impose this on you or your former employee.  

Key Takeaways

As an employer, you must have insurance in place. Not having it where you should or not displaying your certificate when required amounts to an incredibly hefty fine. The minimum insurance an employer must have is £5 million worth of cover. There are various rules about liability insurance, such as when you may not need it and what conditions it can state. It is also vital that you get your insurance through an authorised insurer, otherwise, you may be breaking the law.

If you need help understanding the rules about Employers’ Liability insurance, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

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