A recent case has highlighted the importance of having Employer’s Liability Insurance in place and gives us an opportunity to reflect on what it actually is and what the law says.

On receiving an anonymous complaint, the Health & Safety Executive (HSE) carried out an inspection at the site of linen manufacturer T & W Linen Co Ltd. During the inspection it became clear they did not have Employers’ Liability Insurance.

What’s Employers’ Liability Insurance?

As an employer you’re responsible for the Health & Safety of your employees while at work. And if an employee is hurt at work or develops a work-related illness they might blame you and claim damages – for example, if an accident occurs because Health & Safety rules haven’t been implemented.

Employers’ Liability Insurance is one of the main types of business insurance and can cover the cost of compensation and legal fees if an employee or ex-employee sues for illness or injury caused by work.

Having this cover ensures your business has a minimum level of protection should an employee get injured or become unwell.

Your policy must cover you for at least £5 million.

Is my business legally required to have cover?

The Employers’ Liability (Compulsory Insurance) Act 1969 makes it compulsory for most employers to take out a policy.

Employers’ Liability Insurance is needed even if you only employ occasional or temporary staff.

There are few exceptions. Two instances where a small business or start-up may be exempt from having cover are:

• limited companies – if you’re a director of a limited company, own at least 50 per cent of the shares, and have no other employees then you’re not legally required to have cover
• unincorporated businesses – if you operate as a sole trader or a partnership, or employ only close family members then the law does not require you to have cover

What does Employer’s Liability Insurance cover?

It’s designed to protect business owners and operators against the risks commonly associated with taking on employees.

It usually allows employers to meet the cost of compensation for employee injury or illness whether caused on or off site. But it may not include incidents that occur while driving as these are usually covered separately by business motor insurance.

As the name suggests, Employers’ Liability Insurance only relates to employees and not to workplace visitors or members of the public. You’ll need public liability insurance to cover potential risks to anybody who isn’t an employee.

Do I need to tell employees about Employers’ Liability Insurance?

When you take out or renew a policy you’ll be issued with an insurance certificate.

You need to display a copy of this certificate where all your employees can read it and make it available to be checked by HSE inspectors.

You also need to keep copies of certificates for at least 40 years (for policies in force since 1998 or later). This is because some illnesses occur many years after the disease is caused.

The penalty 

The fines for not having a suitable policy can be huge – you can be fined £2,500 for every day you’re not properly insured!

You can also be fined £1,000 if you do not display your certificate or refuse to make it available to HSE inspectors when asked.

Regarding the case of T & W Linen Co Ltd, they admitted breaking the Employers’ Liability (Compulsory) Insurance Act 1969. They were fined £2,500 and ordered to pay costs of £430.

The HSE stress employers must insure against liability for injury or disease to employees arising from their employment and employers failing to comply with the insurance law will be held to account.