What does employer’s liability insurance cover?

14 March 2019

This is probably the second most-asked question about employers’ liability insurance. Coming a respectable but distant second to ‘Do I need employers’ liability insurance?’, finding out what is covered by a policy is the natural outcome of understanding that one must be put in place.

Put simply, on the GOV.UK website, the guidance states that: “You must get Employers' Liability (EL) insurance as soon as you become an employer – your policy must cover you for at least £5 million and come from an authorised insurer.”

More on ‘authorised insurers’ to come, after explaining what is covered when you take out employers’ liability insurance. Unless you’re the sole director of a limited company, own half or more of the shares and have no employees, you’ll want to read on.

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The essentials of employers’ liability

If an employee becomes either ill or injured due to the work they are employed to perform, employers’ liability insurance will cover any compensation costs owed by your business as a result. If you have full, part-time, or even temporary staff working for you, on your premises or a workplace you run, every member of staff has the potential to make a claim.

On top of these costs, which could range from the surprising to the unthinkable, businesses that legally require this cover, but don’t have it, may be forced to pay a fine of £2,500 for every day that they remain uninsured. Other costs you could encounter – for instance, if you don’t display your employers’ liability certificate or show it to Health and Safety Executive inspectors – include one-off fines of £1,000.

It is health and safety that plays the biggest part in defining employers’ liability insurance. As an employer, you are responsible for the health and safety of your staff while they work. The Employers’ Liability (Compulsory Insurance) Act 1969 requires you to hold a minimum level of insurance to cover your business against such claims.

Who can make a claim?

While this may not be your situation, it isn’t uncommon for employers to encounter trouble when identifying ‘who’ exactly are their staff. With so many different contractual situations and employment conditions around, such as seasonal work, large sites full of temporary workers, and the dreaded ‘zero hours’ contracts, employers’ liability can become something of a grey area for business owners.

So, if you fall into this demographic, try to consider the following when you’re assessing ‘who’ could make a claim against your company. Primarily, anyone whose National Insurance contributions or Income Tax is deducted, at source, by your business could issue a claim against you.

Similarly, if you provide somebody with most of the equipment and materials they use, or control when, where and how they work – your employers’ liability insurance covers claims these staff could make.

If you have the right to claim any profit made by any of your employees, you’ll need it to protect against any compensation claims they make. Do note that all of the above applies to part-time and temporary staff, not just full-time employees. Also bear in mind that, if one of your employees is unable to finish a job, at a financial loss to your business, you can also make a claim in order to cover the expense.

When might I need to make a claim?

Depending on the type of business you run, your health and safety risk assessment is the first place you should look for a potential claim. However, it is not always as straightforward as injuries incurred from falling scaffolding, or staff slipping on recently cleaned floors. Often, it is the more innocuous injuries and illnesses that are the most difficult to foresee – and the expensive to take care of.

For instance, as more staff have been employed to use computers in their work, injuries sustained due to excessive use of workstations have become more commonplace. With more attention paid to mental health in recent years, too, Personnel Today has identified that employers’ liability claims relating to mental health have similarly been on the rise.

Fundamentally, it is the unpredictability of injuries, illnesses and accidents – and how certain individuals react to these eventualities – that makes the Employers’ Liability Act, and employers’ liability insurance, so important.

This legal requirement is in place to protect your business, both when it is culpable for a compensation payout and when you know you’ve done nothing wrong – even if another person might not agree. To enquire about a tailored policy that protects your business, call a member of our team today on 0333 999 0802.