The employers’ liability insurance can be just yet another type of business insurance. However, it’s an essential cover for any business. Why so? Because it protects you against any claims your employees might make regarding injuries or illnesses they suffer at work. It covers any compensation you are liable for, together with the legal defense costs. Being such an important aspect of a company, today we are going to look at a couple of things to know about this employer’s liability insurance.
Employer’s Liability Insurance – Everything You Need to Know
1. Who Needs It?
The employer’s liability insurance is useful for almost any business. This happens because the legal definition of the term ‘employee’ can be quite broad. To make sure that the insurance covers as many people as possible, ‘employee’ doesn’t limit its coverage only to permanent staff hired under contract. Sometimes, the employees against you need to protect yourself aren’t even paid, for example. Other employees that can be included in this category are:
- Part-time workers;
- Work experience kids;
- The staff you borrow, etc.
2. Who Doesn’t Need It?
There are some companies who don’t need the employer’s liability insurance, such as publicly funded organizations. Besides them, there are also other cases when you don’t need to have it:
- If you’re both the owner and the sole employee and you own 50% or more of the issued share capital;
- Family businesses who are not incorporated as limited companies; here, all the employees are related to the business owner (father, son, brother, etc.).
3. What’s the Minimum Cover?
The minimum amount to cover depends from country to country. For example, in the UK the minimum amount is £5m, but most insurers offer £10m.
4. What If You Don’t Have It?
The employer’s liability insurance is enforced by law. There are significant fines you should pay if you don’t offer this insurance to your employees. Moreover, if you have it but you don’t display the insurance certificate, you can still get fined. However, in some cases, you may receive a couple of days to solve the problem if a health and safety officer comes knocking.
5. Where Do I Keep It?
Just as we mentioned earlier, it’s important to display your insurance certificate. As soon as you receive your policy documents from the insurer or broker, place them on your office wall, in a place where they can be easily noticed. In case you don’t have a wall, you can store them in a virtual place. In this case, you need to ensure that your team knows where to find the papers in case they need them.
6. What Incidents Does the Insurance Specifically Cover?
Here you have some examples of specific incidents covered by the employer’s liability insurance:
- A factory worker who cuts his hand while operating company machinery;
- One employee falls off scaffolding while doing some construction work, breaks their leg and needs some time off work;
- A secretary suffering from repetitive strain injury because of persistent computer work in the office, etc.
The payments you would need to make following similar incidents can be quite large, even reaching tens of thousands of dollars. This can be crucial for a small business, for instance. That’s why the insurance protects you and pays for the compensation, plus other legal costs, which means that your company may be saved precisely by this kind of insurance.
7. What Are the Most Common Claims under the Insurance Cover?
Theoretically, the employer’s liability insurance covers all the possible claims. Even so, there are some claims that proved to be more common than others. These are a couple of them:
Third party over actions
In this case, another party gets held liable for the employee’s injuries and files a lawsuit against your company. Let’s say a worker gets injured while using a piece of machinery you hadn’t maintained properly. Then, they sue the manufacturer of the equipment, which in turn sues you for contributory negligence.
For this example, let’s take an employee who got injured at work and whose spouse files a lawsuit against you. They decide to sue the business because their spouse cannot sustain marital relations anymore after the injury.
If the family members of the injured employee suffer bodily injuries because of the first accident, they might sue your company. For instance, a roofer falls off a roof and becomes paralyzed. Their wife suffers an aneurysm due to the high blood pressure and the stress that followed the accident. In turn, she could sue your company for medical damages.
This refers to the case in which an employee sues the company because they got injured by a product manufactured by the employer. In this case, the company is liable both as the employer and as the manufacturer.
8. Are There Any Limits to This?
Indeed, there are some limits to the employer’s liability insurance. For instance, one or two big claims may exhaust the statutory limits of this insurance. In this case, the employers should purchase an increased liability coverage. There is an additional premium for increasing the limits, which is nominal, in relation to the added protection it provides. For example, an increase of 2 – 3% can equal an increase in coverage from $500,000 or even $1 million, depending on the insurance company. This addition can apply to bodily injury per employee, bodily injury per disease or bodily injury per occurrence.
Here you can watch a short clip explaining more on this topic:
The employer’s liability insurance isn’t just recommended, but compulsory in many countries and states. However, even if the initial investment may seem a little too much, the advantages are surely worth it. Depending on the history of the company and how many claims it faced, the price for increasing the limits of the insurance may grow. Even so, with a little research, you can find out plenty of cases where this type of insurance saved a small business from going bankrupt.
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