What is liability insurance?
Liability insurance is the umbrella terms for covering the costs of compensation and legal fees if a business or individual is found legally responsible for injuring someone or damaging their property.
Liability insurance protects businesses and individuals from any claims made by clients or customers and members of the public. The common types that fall within this insurance category are public liability insurance and employers’ liability insurance.
Public liability and employers’ liability: What is the difference?
In simple terms, public liability insurance covers an employer’s legal liability to pay damages to members of the public for death, bodily injury or damage to their property that occurred because of their business activities. It also covers legal fees, costs and expenses such as court hearings.
Employers’ liability insurance covers claims from employees who are injured or become ill because of their work. It also covers for compensation and legal fees when the employer is at fault.
In this guide, we will be addressing elements of employers’ liability insurance.
Why is employers’ liability insurance important, and why does it matter when it comes to health and safety?
The implications of a liability claim could be significant because successful claims made by employees can lead to an award of damages amounting to millions of pounds and legal fees.
Without employers’ liability insurance, employers could face financial ruin, and have their livelihood at risk. An unexpected event could cause financial strain and under current laws be detrimental to years of hard work.
Employers in the UK are responsible for the health and safety of their employees while they are at work. Employees may be injured at work or they, or former employees, may become ill as a result of their work. They might try to claim compensation if they believe a business is responsible.
The Employers’ Liability (Compulsory Insurance) Act 1969 ensures a minimum level of insurance cover against any such claims.
Insurance premiums will also consider a business’s risks and are likely to take account of records of accidents and incidents, ill-health and previous claims. If the correct health and safety procedures are implemented, it will reduce the level of insurance risk and this will be reflected in the premium charged.
This is businesses need to have the correct risk assessments in place, a written health and safety policy, and reporting accidents to the health and safety executive under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations and many more.
If businesses don’t have these health and safety procedures in place, they risk zero coverage from their insurance on legal fees and any claims made by employees.
Is it a legal requirement to have employers’ liability insurance?
In the UK, the Employer’s Liability (Compulsory Insurance) Act 1969 imposes a statutory requirement for all employers to insure against their legal liability for injury, disease or death to employees sustained by them and that are a result of their employment.
UK employers are legally required to insure for at least £5 million but in practice, most policies offer £10 million minimum cover. Employers are also required to display a Certificate of Employers’ Liability Insurance at each place of work or make an electronic copy available to every employee.
The Health and Safety Executive (HSE) enforces the law on employers’ liability insurance and have the legal right to request proof of a business’s employers’ liability insurance with an approved insurer for at least £5 million is in place. They may also ask to see the Certificate of Insurance and other insurance details.
Failure to display a Certificate of Insurance or provide a copy to an HSE inspector is an offence for which a penalty of up to £1,000 can be imposed.
Failure to carry Employer’s Liability Compulsory Insurance is an offence which carries a penalty of up to £2,500 for every day on which a business operates without suitable insurance.
What and who does employers’ liability insurance cover from?
Employer’s liability insurance covers potential claims made by employees, which include:
- Volunteers
- Contractors
- Temporary staff
- Interns
- Students
- Self-employed
This is regardless whether they are working under a contract or part time work.
How do I know what liability insurance my business needs?
Insurance is a complex issue which needs to be both affordable and meet the needs of a business. There are insurance policies other than those outlined here which may be relevant to some businesses and individuals. The type of liability insurance depends on the activities carried out at the workplace.
At Peninsula, we can advise and guide you through the web of liability insurance, making sure you it is tailored to your business. We can support you in assessing the risks of your business and determine the appropriate level of cover.
Let Peninsula support you r business
Peninsula’s expertise can advise on any questions you have on liability insurance. Not only that, you’ll have access to 24/7 Health & Safety guidance, as well as unlimited support for your documentation.
To supplement your needs further, you’ll receive the latest in Health & Safety software, so you can refine your processes.
If you’d like to discuss things further, request a call back today.
