Month: June 2017

    A Closer Look At The Different Types of Liability Insurance Available

    All businesses face their own unique set of risks and challenges, depending on the industry they work in, the number of employees they have on their payroll, the equipment they utilise, and the operating procedures instilled by the company. Typically, however, most insurance plans fall into six basic categories:

    • General Liability
    • Public Liability
    • Product Liability
    • Professional Liability
    • Employers Liability
    • Personal Liability
    • Self-Employed and Miscellaneous Insurance Products

    General Liability Insurance

    General liability insurance is a comprehensive package or combination of the insurance types listed below. While generally cheaper than purchasing each insurance product individually, it may contain many options and bundled items that you find superfluous.

    Public Liability Insurance

    Public liability insurance protects your business against any lawsuit or claim made by your employees or the public due to a breach of negligence. Such an accident can occur both on and offsite, so long as the business is shown to be culpable in causing the injury or damages. If the business is covered by an public liability insurance policy, however, the insurer is responsible for all expenses, legal fees, and settlement costs. It is up to the insurance company to determine if it wants to fight the case or pay the requested damages.

    Product Liability Insurance

    Product liability protects your business in the instance of a product malfunction. Mechanical failures and manufacturing defects are common grounds for lawsuits by consumers. Certain industries who run the risk of damaging property or the environment via spills and hazardous pollutants may also seek insurance for product liability. Product liability, however, does not protect a business for selling a poorly designed product. Only errors in the manufacturing process are covered.

    Professional Liability Insurance

    Also referred to as professional indemnity insurance, this coverage safeguards consultants, lawyers, doctors, and financial advisers from claims of negligence. Given the subjective nature of advice and the complexities of these professions, its important to have some level of protection should a client feel they were advised poorly. This insurance is also popular with real estate agents, journalists, and IT consultants.

    Employers Liability Insurance

    Another hazard businesses face is the potential for a severe injury or illness to affect their employees. If this illness is found to be the cause of employer negligence, you will be held liable for medical treatment, legal fees, and compensation. An example of this would be industries that knowingly allowed their workers to handle asbestos fibres years after research has shown their link to pernicious forms of cancer. All businesses in the UK must have a bare minimum of £5 million of liability coverage for their employees.

    Personal Liability Insurance

    Various offences of a personal nature such as libel, slander, or copyright infringement fall under the category of Personal Liability Insurance. Often times when companies work together on a project they may have access to sensitive information. If that information as used maliciously or to advance one’s own business, that can be grounds for a lawsuit. False advertising claims also fall under the realm of personal liability insurance. If a customer feels they were not properly informed of the inherent dangers of a product, they may file a claim.

    Self-Employed Liability Insurance

    Given the smaller profit margins, lack of employees, and minimal use of equipment, a self-employed individual runs little risk of being sued, provided they are not offering consultation or advice. However, this does translate to much lower premiums, and opting for no insurance can expose you to losing your business from a single negligence claim. Given the specific needs of the self-employed, one option is to join a self-employed insurance network that pools together funds from similar businesses. Other options include contacting a provider and asking for a flexible coverage plan that is tailored to your individual requirements. Many insurers now offer a variety of options in addition to their standard coverage packages.

    How Much Is Public Liability Insurance?

    Liability insurance is risk financing insurance for the protection of the insured against liabilities that can be imposed by lawsuits. With liability insurance, payments are made to people who suffer a loss because of the insured or his/her business. All businesses that deal with clients, customers and people from the public sector should have liability insurance, and if these businesses have employees, then having employer’s liability compulsory insurance is a legal requirement. Not only is it considered to be good business sense to get liability insurance but prospective clients and customers may insist that a company have liability insurance before they will do business with that company.

    Public liability (PL) insurance is a specific type of liability insurance that pays compensation on behalf of industries and businesses that are involved in operations that may cause property damage or physical injury to members of the general public. Businesses that have heavy public traffic on the premises have the greatest potential for PL risks and therefore should secure PL insurance. Examples of these types of businesses are hotels, shopping centres, theatres, clubs, pubs and sporting venues. If shows, events and alcohol consumption are included, it will increase the risks for public liability. Some insurance companies offer a package that includes both PL and employer’s liability compulsory insurance together, and some insurance companies like the offer PL insurance as standard cover under some of their other business insurance policies.

    Costs of Public Liability Insurance

    The cost of PL insurance depends on the following factors:

    • The type of business that’s being insured;
    • The location of the business that’s being insured;
    • The class of insurance that will be chosen for the insured which is determined by the degree of probable risk involved within the business’ operations;
    • The number of people that will need to be insured; and
    • The level of activity in the businesses.

    For risks that are considered as small- to medium-sized, insurers may use what is called a book or average rate, which uses rates that are calculated according to past claims that have been paid out to similar businesses. For larger businesses, the rate may be calculated according to those businesses’ claim records over a stipulated number of years. Once an estimated rate has been determined, the insurer may adjust the rate according to past claim risks, and whether or not the business operates under a good risk management program with sufficient health and safety rules in place.

    Business owners can obtain PL insurance that furnishes £1,000,000, £2,000,000 or £5,000,000 of coverage. Coverage for higher amounts is possible under an excess of loss policy.

    What Public Liability Insurance Covers

    PL insurance covers the following:

    • Any awards for injuries, losses or damages suffered by members of the public that are caused by the insured or his/her business;
    • If cases proceed to trial, PL insurance will pay a specified amount for legal fees incurred for expert witnesses, solicitors, accountants and barristers, in addition to other court costs;
    • Other costs and expenses that are related to the claim; and
    • Hospital treatment and cost of ambulances.

    The Importance of Obtaining Public Liability Insurance

    Over the years, there’s been an increase in the number of claims sought to satisfy complaints of damage and injury. Also, filing lawsuits has become more of a reality as a result of the advent of the “no win, no fee” cases that are offered by many barristers. Therefore, it has become imperative that business owners protect themselves against the significant financial losses that can result from these lawsuits. If business owners do not have insurance and they are sued, they risk not only possibly losing their businesses but depending on the size of the lawsuit, they may even risk losing personal belongings such as their homes and other assets they may possess if their companies lack sufficient funds to settle the claims.

    Comparisons can be done on the types of insurance available and quotes can be obtained by searching through the many online sites that contain this information. However, for all business owners who wish to purchase liability insurance but are unfamiliar with the facts and information involved, it’s advisable that in addition to doing online research, they should also consult with an insurance broker as well. They should discuss their specific needs with an insurance agent because there are various warranties, exclusions and conditions that are applicable when deciding on the cost of the insurance. Also, business owners should remain mindful of the fact that if they have employees, a statutory law compels them to obtain employer’s liability compulsory insurance, and failure to do so could lead to a fine of up to several thousand pounds per day.

    The Nitty Gritty Of Employers’ Liability Insurance

    The Employers’ Liability Act of 1969 is a mandatory requirement for businesses to have liability insurance for employees that suffer an injury or illness arising from the workplace. Liability insurance safeguards a business from the multitude of costs and legal fees associated with damages attributable to employer negligence.

    This allows employees to seek compensation even should the business enter liquidation or receivership. The following guide is designed to help employers understand the requirements for the Employers’ Liability Act, and is not intended as a formal interpretation of the law.

    What is Employers’ Liability Insurance?

    Employers are responsible for the safety and well-being of their employees at the workplace. Depending on the nature of their work, it is not impossible for an employee to be injured or suffer an illness at their place of employment. If this situation is the result of employer negligence or error, the employee may be entitled to receive compensation. The Employers’ Liability (Compulsory Insurance) Act guarantees that an employer has the bare minimum level of insurance to cover them against such a claim. Normally, a person is defined as an employee if:

    • Deductions are taken from salary for income tax and national insurance contributions
    • The employer dictates when, where, and how a person works
    • The employee cannot employ a substitute should they be unavailable for work

    Typically, this coverage will extend to injuries or maladies occurring on or off site. However, if the damages are the result of a motor accident, your employees may be covered separately by your company motor insurance plan. Public liability insurance, on the other hand, will not cover your employees in the event of a workplace accident. Public liability insurance is designed to protect businesses from claims made by the public or other companies, and does not provide coverage for claims made from within. Other key points include:

    • By law, employers must have coverage of at £5 million, although most providers start with policies starting at £10 million. Once coverage is acquired, a certificate will be given to the employer which must be displayed in an area visible to employees or at an easily accessible place on the internet. Those who fail to meet these requirements are subject to fines of up to £2,500 per day by the Health and Safety Executive.
    • Generally, employers’ liability insurance will cover anyone under your supervision, which includes volunteers or self-employed individuals contracted for work.
    • Compulsory liability insurance is not required for businesses who are not limited companies and the owner is the only employee. Limited companies with only one employee are also exempt provided the employee owns a majority of the issued shares.
    • Employers are strongly encouraged to maintain a thorough record of their employers’ liability insurance. Some diseases have a high latency period and symptoms do not appear until decades after exposure. Consequently, an employee may wish to make a claim against an employer for the period during which they were exposed. Not having the proper insurance details regarding past coverage can result in the employer being responsible for the costs of the claim.
    • Insurers are responsible for the full amount of any compensation awarded to an employee either by court or through a settlement. By law an insurer cannot impose restrictions or conditions where the employer will be obligated to pay a portion of the claim. However, an agreement can be made with a policy provider where the employer pays part of the compensation back to the insurer at a later date.

    Who Needs Employers’ Liability Insurance?

    For the most part, all employers must obtain employers’ liability insurance to legally operate in the UK. However, some organisations are excluded from this restriction. Liability insurance is compulsory for all employers unless they fall under the following exemptions:

    • Public Organisations – Nearly all public organisations are exempt, including local authorities, government departments and agencies, nationalised industries, and police authorities.
    • Health Service Bodies – Examples include the National Health Service trusts, Scottish health boards, primary care trusts and other health authorities.
    • Publicly Funded Organisations – Any organisation financed through the dispersal of public funds like a magistrates’ courts committee or passenger transport executive.
    • Family Businesses – If all of your employees are close relatives, such as a spouse, children, or grandparent, the business is exempt from having to obtain liability insurance. However, this exemption is not applicable to any business that is incorporated as a limited company.
    • Self-Employed Companies – Any business where the owner is the sole employee and owns more than half of any issued share capital.

    Qualified Employees and Exemptions

    Most individuals who work for an employer are required by law to be covered under the employers’ liability insurance plan. Typically, those employed under a contract of service or apprenticeship must be covered. In other words, whether or not employers’ liability insurance is necessary depends on the terms of the contract. This contract can be spoken, written, and even implied. Furthermore, the nomenclature applied to the contract or the position is irrelevant. What matters is the actual nature of the position, the relationship with the employer, and the degree of control the employer has over the work performed.

    The following paragraphs provide an overview of whether or not an employee should be covered by employers’ liability insurance. It should be noted that this is a general guide, and that any employers with specific questions pertaining to an employee should seek legal advice. In most cases, workers who fall under the following categories are likely to require employers’ liability insurance:

    1. The employer deducts national insurance contributions and income tax from an employee’s salary.
    2. The employer controls where, when, and how they work.
    3. The employer supplies all work materials and equipment.
    4. The employer is entitled to all profits generated by the worker, but may elect to share it through commission, shares, or performance based pay.
    5. The employee is responsible for their designated assignment and cannot employ their own substitute
    6. The employee, despite lack of an official title or contract, performs the same work under the same conditions as other employees.

    Not all employees, on the other hand, require employers’ liability insurance. The following is a list of workers exempt from coverage:

    • Workers who are not employed exclusively by you, such as an independent contractor.
    • Workers who supply their own equipment and materials to perform their job.
    • Workers strictly in business for their own personal gain.
    • Workers who have the option of employing a substitute when they cannot do the job themselves.
    • The employer does not deduct income tax or national insurance from the employee’s salary. However, while an employee may be listed as self-employed for tax purposes, they still may qualify as an employee under other circumstances.

    Unpaid workers are generally considered employees under the Employers’ Liability Insurance Act. The following individuals are required to be covered by law:

    • Unpaid Interns or students
    • Volunteers
    • Individuals not employed but participating through a youth or adult training programme
    • Students on a work experience programme. For more information, contact the Department for Children, Schools and Families’ publication.

    Typically, unpaid volunteers and interns are covered automatically under a employer’s liability policy, and therefore do not require any extra action from the employer. Nevertheless, should any person be taken on for an extended period of time, it behoves the employer to contact the insurer and confirm the coverage is still applicable. This is especially true if the worker is asked to conduct actions outside the company’s usual business, as it may involve risks outside the terms agreed upon with the insurer. In many cases, special measures may need to be taken in order to adequately cover the individuals listed above.

    Finally, businesses that utilise domestic help such as cleaners, gardeners, or nannies, generally do not have to cover those workers under the Employers’ Liability Insurance Act, particularly if they perform these duties for more than one company. However, if these individuals work exclusively for one employer, they may require coverage.

    What Level of Cover Do I Need?

    According to the law, an employer must be insured for at least £5 million. However, while this figure may satisfy the legal requirements necessary for coverage, it is essential that employers study their own risks and liabilities and consider whether this amount is accurate. In practice, the majority of insurers offer plans that start at £10 million.

    If a business is part of a larger group, the policy for employers’ liability insurance can be applied to the group as one entity. This includes all subsidiary companies as well. In this case, the group as a whole can opt for a coverage of £5 million as opposed to each individual being responsible for that level of coverage. Nevertheless, it is still possible for employers to take out more than one policy for employers’ liability insurance. As long as the summation of coverage is equal to or greater than £5 million, the company or group is absolved from any fines.

    Employees Working Abroad

    If an employee typically works in England, Scotland or Wales, including any offshore buildings, liability insurance is compulsory. Under British law it is not required that employers obtain coverage if their employees are based abroad. Nevertheless, it is possible that the law in that country stipulates that employers must provide liability coverage in some form. Furthermore, international employees that spend more than 14 continuous days in Great Britain or more than 7 days at an offshore installation must be covered by employers’ liability insurance.

    Informing Employees of a Policy

    Whenever an employer signs up for or renews an existing policy, they are provided with a certificate of employers’ liability insurance. The certificate must clearly state the minimum level of cover offered and the companies that fall under this coverage. The law dictates that employers must display a copy of the certificate in an area where employees can easily read it.

    However, as of October 2008 the law has been altered to allow for electronic display of this certificate. Employers who opt for this option must notify their employees of this fact and place the certificate in an easily accessible location. When choosing whether to have a physical or electronic certificate, employers often factor in the availability of the chosen format. For instance, an electronic certificate may be ideal in a workplace where all employees have access to a computer as part of their normal activities.

    The same certificate used for England, Scotland, and Wales can be displayed for any employees that are working in the Isle of Man, Jersey, Guernsey, or Northern Island. Nevertheless, certain regions may have additional requirements and employers often must stay abreast of those laws as well as the ones that govern Great Britain. If your workers are employed on offshore installations or associated structures, a copy of the certificate is not required at every location. On the other hand, if any employee requests to see a copy of the certificate, you must produce a copy within ten working days of the query. This copy can be delivered via fax or electronically, depending on which is more convenient for both parties.

    Old and Expired Certificates

    As of October 2008, there is no longer a legal mandate for employers to retain older and out-of-date certificates. While this is not a legal requirement, it is still heavily advised that employers keep a detailed record of their employers’ liability insurance history. Many diseases are known to show symptoms decades after contraction, and any claims filed will typically be for the duration of time when they were exposed. As such, it is essential that an employer have the details of their insurance and liability coverage for every year they were in business to ensure they are protected against these types of incidents. If the employer fails to identify the insurer for that time period, it may result in the employer being responsible for the damages incurred.

    What Are the Penalties for Not Having Employers’ Liability Insurance?

    Without employers’ liability insurance, a business must compensate their workers in full for any injury or disease caused in the workplace due to error or negligence. However, even if no such accident were to take place, a company may still be heavily fined for not adhering to the requirements stipulated by British law. As the enforcement body for employers’ liability insurance, the Health and Safety Executive (HSE) can dispense inspectors to a business to verify they have met the legal requirements. Inspectors may ask to see an employer’s certificate as well as confirm their policy is at least £5 million. The Health and Safety Executive has the authority to fine businesses up to £2500 for any day they are without suitable liability insurance. Failure or refusal to display the certificate can also result in a fine of up to £2500.

    Authorised Insurance Companies

    A provider must be authorised to sell employers’ liability insurance in order for that policy to be recognised. In fact, opting for an unauthorised provider may be in violation of the law. Authorised providers are those companies who comply with the terms stated in the Financial Services and Markets Act 2000. Confirm your seller is an authorised insurer with the Financial Services Authority (FSA) before agreeing to a policy via their website at or by telephoning 0845-606-1234. The FSA keeps a register of insurers who qualify for selling employers’ liability insurance.

    Normally, the terms of your employers’ liability insurance will vary depending on your insurer and the nature of your business. As different companies are subject to different risks, the policy can be adapted to cover specific activities unique to that business. However, other conditions that limit the amount of compensation the insurer is responsible for are prohibited by law. For example, an insurer cannot refuse to pay benefits solely on the basis of the following:

    • Reasonable protection against disease or injury was not provided by the employer
    • Record keeping by the employer was not at a satisfactory level
    • The employer has acted against the will of the insurance company, e.g., claimed fault or responsibility
    • The employer refused to act as the insurance company advised them, e.g., reporting an incident
    • The employer has not met a legal requirement for protecting their employees

    Although these instances do not preclude an employer from receiving insurance, it does mean that they can simply ignore their legal responsibilities to protect the health and safety of their employees. If an insurer feels that an employer did not adhere to the precautionary measures and safety checks stipulated by law, they have the option of suing the employer to reclaim the cost of the liability compensation. For this reason employers must conduct proper risk assessment, provide adequate safety measures and report any incidents that occur.

    Further Information

    Any employer seeking legal advice or is unsure of the status of an employee should consult a solicitor, legal centre or a Citizens’ Advice Bureau. Employers can also contact their local HSE office or HSE’s Information line. Other information and free publications are available at their website.