Companies that employ staff are legally obliged to take out employer’s liability insurance, which protects you in the event of employees being injured whilst undertaking duties under the terms of their employment
What is employer’s liability insurance?
Employer’s liability insurance covers businesses for damages owed to employees that have taken legal action due to illness or injury that have occurred at work due to employer negligence.
What does employer’s liability insurance cover?
Depending on the policy, employer’s liability insurance covers both damages and legal fees that are payable if an employee wins a court case against you for illness or injury caused by your negligence. These may include compensation as well as hospital fees (including ambulance costs), which the NHS can claim back from you should a court also award the employee personal injury compensation.
How much cover do I require?
Cover of up to £5m is required by law but most policies will cover you up to £10m. Policies must cover employees working in England, Ireland, Scotland and Wales.
Who counts as an employee?
As employers make use of virtual workers, contractors and freelance professionals the definition of employee becomes increasingly blurred. For the sake of employer’s liability insurance, you can count someone as an employee if you:
- contractually oblige them to provide a defined level of service
- deduct NI contributions and income tax from an agreed salary
- do not allow them to employ a substitute if they cannot work for you
- control when and how they work for you
Are there any exemptions?
Businesses that are not registered as limited and employ only close family members, or noone at all, do not need employer’s liability insurance. Limited companies that have only one employee that owns 50 per cent or more of the company by shares are also not required by law to have cover
Displaying your policy certificate
Insurance companies will send you a certificate that outlines your policy details when you take out employer’s liability insurance. This must be overtly displayed so that employees can easily see it and read it. Either display it electronically, for example as a document on a shared drive, or as a paper copy hung on the wall or affixed to a notice board.
Health and safety inspections
Health and safety inspectors may inspect your premises to ensure you both have suitable cover and that your certificate is displayed. If you do not display your certificate, and can’t make it available to inspectors if they request it, you could face a fine of up to £1,000. If you do not have a suitable policy in place, you can be fined up to £2,500 a day until you do
Employer’s liability insurance records
Make sure you keep full records of all employer’s liability insurance policies. Diseases caused by exposure (for example to asbestos) can manifest many decades later and may result in legal action being taken. If you can’t prove you had employer’s liability insurance at the time of exposure you may have to pay damages and legal costs out of your own pocket.