Employers Liability Insurance

Transcription

1 TSSA Reps Bulletin Ref: H&S/076/Oct 2008 Employers Liability Insurance Introduction From 1 October 2008, the Employers' Liability (Compulsory Insurance) (Amendment) Regulations 2008 (SI 2008/1765) remove the requirement for employers to retain their insurance liability certificates for 40 years. In light of this change that was opposed by the unions it considered an opportune time to look at Health & Safety Executive (HSE) guidance on the Employers Liability (Compulsory Insurance) Act The recent regulations also allow the certificate to be made available electronically. Under the Act, subject to exemptions (see below), all employers are required to have employer's liability insurance, including an up to date certificate. This is valid for a year and should be displayed in a prominent position in the workplace or made available electronically, provided it is reasonably accessible to relevant employees. There is a penalty of up to 1,000 for failure to display a valid certificate or refusing to make it available to Health and Safety Executive (HSE) inspectors. Being without insurance can cost an organisation up to 2,500 per day. What is employers liability insurance? Employers are responsible for the health and safety of their employees while they are at work. Employees may suffer injury at work or they, or former employees, may become ill later as a result of their work while in employment with an employer. Employees /former employees who have been injured or develop an illness that they believe the employer is responsible for may claim compensation from the employer. The Employers Liability (Compulsory Insurance) Act 1969 requires employers to have at least a minimum level of insurance cover against any such claims. The insurance indemnifies the organisation against any claims for civil liability that may arise as a result of injury and/or disease, but will not cover fines under criminal law. Under the Employers' Liability (Compulsory Insurance) Regulations 1998 (SI 1998/2573) the minimum cover is 5 million. Employers liability insurance is supposed to enable employers to meet the cost of compensation for their employees injuries or illness whether they are caused on or off site. However, any injuries and illness relating to motor accidents that occur while employees are working may be covered separately by employers motor insurance. Public liability insurance is different. It covers organisations for claims made against them by members of the public or other businesses, but not for claims by employees. While public liability insurance is generally voluntary, employers liability insurance is compulsory. Employers can be fined if they do not hold a current employers liability insurance policy which complies with the law. Do employers need employers liability insurance if employees work abroad or the company is based abroad? 1

2 If any employees are normally based in England, Scotland or Wales (including offshore installations or associated structures) employers must have employers liability insurance. Under the law in Great Britain employers do not need employers liability insurance to cover any of your employees who are based abroad (eg if they are on secondment). However, they should check whether the law in the country where they are based requires them to take out insurance or take any other measures to protect their employees. If any employees are normally based abroad but spend more than 14 days continuously in Great Britain, or more than seven days on an offshore installation, under the law in Great Britain the employer will need employers liability insurance to cover them. Which insurance companies can sell employers liability insurance? Employers must use an authorised insurer. If they do not, they may be breaking the law. Employers should check that their insurer is authorised before taking out employers liability insurance. Authorised insurers are individuals or companies working under the terms of the Financial Services and Markets Act The Financial Services Authority (FSA) maintains a register of authorised insurers. Whether a company is authorised can be checked by searching their register on or telephoning the FSA on Can an insurance policy contain conditions? If an employer takes out employers liability insurance, they will have an agreement with their insurer about the circumstances in which they will pay compensation. For example, the policy will cover the specific activities that relate to the employer s business. There are certain conditions which could restrict the amount of money the insurer might have to pay, which the employer cannot agree and their insurer cannot impose. The employer should make sure that the contract with their insurer does not contain any of these conditions. An employer s insurer cannot refuse to pay compensation purely because: the employer has not provided reasonable protection for your employees against injury or disease; the employer does not keep specified records or cannot provide the insurer with information from those records; the employer has done something they told not to do; the employer has not done something they were told to do (for example, report the incident); or the employer has not met any legal requirement connected with protection of their employees. However, this does not mean that the employer can forget about their legal responsibilities to protect the health and safety of employees. For example, employers must carry out a risk assessment that is suitable and sufficient, and take all reasonably practicable measures to protect employees and report incidents. If the insurer believes that the employer has failed to meet their legal responsibilities for the health and safety of their employees and that this has led to the claim, the policy may enable the insurer to sue the employer to reclaim the cost of the compensation. 2

3 Can the insurer make an employer pay part of any claim for compensation? The insurer must pay the full amount of any compensation agreed with the employee or former employee or awarded to them by a court. The insurer cannot impose conditions which make the employer, employee/former employee pay part of any claim. However, the employer can agree with the insurer that they will pay back to them part of any compensation which they have paid to the employee/former employee. How much cover do employers need? Employers must be insured for at least 5 million. However, they should look carefully at their risks and liabilities and consider whether they need insurance cover of more than 5 million. According to the HSE, in practice, most insurers offer cover of at least 10 million. If a business is part of a group, a policy for employers liability insurance can be taken out for the group as a whole. In this case, the group as a whole, including subsidiary companies, must have cover of at least 5 million. Employers can have more than one policy for employers liability insurance. However, the total value of the cover provided by the policies must be at least 5 million. Employers should bear in mind that the 5 million minimum level of cover includes costs, so they may wish to purchase cover of more than this. Does the employer need to tell employees that they have employers liability insurance? When the employer takes out or renews a policy, the insurer will give them a certificate of employers liability insurance. This must state clearly the minimum level of cover provided and the companies covered by the policy. The employer must display a copy of the certificate of insurance where employees can easily read it. Since 1 October 2008 employers have been allowed to display the certificate electronically. Employers choosing this method need to ensure employees know how and where to find the certificate and have reasonable access to it. Factors to consider include the availability of the chosen format and ensuring employees understand how to use it. For example, this arrangement may be suitable where all employees have access to a computer as part of their job. If an employer has employees working in the Isle of Man, Jersey, Guernsey or Northern Ireland as well as in England, Scotland or Wales they can use the same certificate in all locations. However, they must check that this complies with any local requirements as well as the law in Great Britain. If employees work on offshore installations or associated structures, the employer does not need to provide a copy of the certificate on every installation. However, if an employee asks to see a copy of the certificate, the employer must provide one as soon as possible and certainly within ten working days of their request. A copy can be provided electronically or by fax if this is easier. Does the law apply to all employers? All employers need liability insurance unless they are exempt from the Employers Liability (Compulsory Insurance) Act. The following employers are exempt: most public organisations including government departments and 3

4 agencies, local authorities, police authorities and nationalised industries; health service bodies, including National Health Service trusts, health authorities, primary care trusts and Scottish health boards; some other organisations which are financed through public funds, such as passenger transport executives and magistrates courts committees; family businesses, ie if all of your employees are closely related to you (as husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, halfbrother or half-sister). However, this exemption does not apply to family businesses which are incorporated as limited companies; or companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company. Do employers need liability insurance for all the people who work for them? Employers are only required by law to have employers liability insurance for people who they employ under a contract of service or apprenticeship. Whether or not they need employers liability insurance for someone who works for them depends on the terms of your contract with them. This contract can be spoken, written or implied. It does not matter whether the employer usually calls someone an employee or self-employed or what their tax status is. Whether an employer chooses to call a contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for the organisation and the nature and degree of control that the employer has over the work they do. The following may help give some indication of whether or not a person is an employee under the Employers Liability (Compulsory Insurance) Act. However, it is for the employer to satisfy themselves of the status of the persons working for them and if they have any doubts, the HSE guidance says they should seek legal advice. Employers may need employers liability insurance for someone who works for them where: they deduct national insurance and income tax from the money paid to the person(s) concerned; they have the right to control where and when such people work and how they do it; they supply work materials and equipment; they have a right to any profit workers make although they may choose to share this through commission, performance pay or shares in the company; they require that person only to deliver the service and they cannot employ a substitute if they are unable to do the work; or such persons are treated in the same way as other employees, for example, they do the same work under the same conditions as someone else employed. Employers may not need employers liability insurance for people who work for them where: those persons do not work exclusively for them (for example, if they operate as an independent contractor); 4

5 those persons supply most of the equipment and materials they need to do the job; those persons are clearly in business for their own personal benefit; the organisation can employ a substitute when they are unable to do the work themselves; the organisation does not deduct income tax or national insurance. However, even if someone is selfemployed for tax purposes they may be classed as an employee for other reasons and the organisation may still need employers liability insurance to cover them. In some cases an employer will not need employers liability insurance for volunteers or for: students who work unpaid; people who are not employed, but taking part in a youth or adult training programme; or a school student on a work experience programme.* Insurers will usually cover the above under an existing employers liability policy, and there is generally no need to inform the insurer if the employer takes on any of the above. However, the employer should talk to their insurer if they take on the above either for long periods, or if they are doing work that is the company s usual business, bearing in mind the level of risk they may be exposed to during the time they are working. It may be necessary to carry out a separate risk assessment (eg for young workers) or take special measures for those listed above. If an organisation does not currently have any employers liability cover they should talk to their insurer before taking on any of the above. One difficult area is domestic help. In general, this will probably not need employers liability insurance for people such as cleaners or gardeners if they work for more than one person, nor is this likely to be needed for employing a childminder. However, if a person is employed who works solely for a particular household or individual, it may be necessary to take out insurance to protect them. (* For more information on work experience see the Department for Children, Schools and Families publication Work experience: A guide for employers. You can find this at Do employers need to keep copies of certificates of insurance which are out of date? Since 1 October 2008 there has been no legal requirement for employers to keep copies of out-of-date certificates. However, employers are strongly advised to keep, as far as is possible, a complete record of their employers liability insurance. This is because some diseases can appear decades after exposure to their cause and former or current employees may decide to make a claim against their employer for the period they were exposed to the cause of their illness. Employers that fail to hold the necessary insurance details risk having to meet the costs of such claims themselves. As was said in the introduction, this change was opposed by trade unions. Whilst it is no longer necessary for employers to keep these records, TSSA would strongly urge them to do so. TSSA reps should consider raising the matter with companies to ascertain their policy on maintaining these records. 5

6 What are the penalties if employers do not have employers liability insurance? The Health and Safety Executive (HSE) enforces the law on employers liability insurance. HSE inspectors can check that employers have employers liability insurance with an approved insurer for at least 5 million. The inspectors can ask to see the certificate of insurance and other insurance details. Employers can be fined up to 2500 for any day they are without suitable insurance. If employers do not display the certificate of insurance or refuse to make it available to HSE inspectors when they ask, they can be fined up to HSE publication: Employers Liability (Compulsory Insurance) Act 1969 A guide for employers, available at: There is also an earlier (March 2002) HSE publication: Employers Liability (Compulsory Insurance) Act 1969 A guide for employees and their representatives available at: The information given here is for general guidance only and should not be regarded as a complete or authoritative statement of the law. Further help and advice may be obtained from the TSSA Helpdesk 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 information The information in this Bulletin is mainly based on a new (October 2008) 6