Insurance is compulsory for all Employers
The Employer’s Liability (Compulsory Insurance) Act 1969 made insurance compulsory for Employers. The Certificate of Insurance no longer needs to be displayed on premises, nor retained for 40 years. However, electronic copies must remain accessible.
There is further protection for Employees because in the event of the Employer’s insolvency the Third Parties (Right Against Insurers) Act 1930 permits the Employer’s rights to be transferred to the accident victim who can then bring a claim against the Insurer direct. However, this is only so long as liability has already arisen. As matters stand, if the Company concerned has already been dissolved, then the Company must be restored to the Register by virtue of Section 651 of the Company Act 1985 in order that Court Proceedings can be brought against it. The Third Parties Act of 2010, if brought into force, will remove this need and the Employer’s rights upon Insolvency will rest in the accident victim immediately.
Is the policy valid ?
Despite the legislation, it is surprising how often a Company fails to disclose the correct information about the nature of its business, the number of staff it employs, or the history of the accidents it has already. Even a failure to disclose certain changes in circumstances (after the insurance policy’s inception) or a failure to co-operate with the Insurer once an accident has occurred, can be grounds for the Insurer’s voidance of the policy. Even where valid, the liability limit may be exhausted, or there may be a large policy excess.
Does the policy cover the injury concerned ?
Then further an Insurer may argue that as a matter of contractual interpretation the policy does not cover the injury concerned. Generally the Courts have shown a robust unwillingness to allow such a voidance of the Insurers obligations.
For example, Insurers have recently argued that where an industrial disease developed years after employment had ended, the disease was not ‘sustained or contracted’ during the course of employment and so was not covered by the policy. Other insurance policies may be written on the basis that liability arises solely upon ‘manifestation’ of the disease.
What is certain is that any condition in a Contract of Insurance, which provides that no liability will arise if an Employer fails to take reasonable care to protect its Employees, is prohibited by the Employer’s Liability Regulations 1989. However, by the same Regulations provided the Insurer meets its obligations, it can require a subsequent contribution from the Employer.
The same Regulations oblige the disclosure of the existence of an insurance policy, but if the Insurer alleges the policy to be ineffective then (unless Judgment is obtained by the Employee) there is nothing that the Claimant can do to challenge this.
The equivalent of the Motors Insurers Bureau (covering Road Traffic Accidents) does not exist to pay out in the event of non-insurance. Neither does a failure to insure expose the Directors of the Company to a claim for non-compliance.
Who is the insurer ?
There has never been any system for recording and publicising Employer’s Insurers. Although the Association of British Insurers is seeking to improve the existing system for tracing Insurers, this remains a voluntary process. The legal grapevine eg APIL (the Association of Personal Injury Lawyers) and Tracing Directors to see if they can recall Brokers names remain critical. Once traced, however, if the Insurer is insolvent then the Financial Services Compensation Scheme will pay out (90% for insurance pre-1972).
Because insurance is there to protect Employers and Employees, the Court of Appeal held that an Insurer’s Employer’s right to an indemnity in respect of Employee injury does transfer to a new Employer who is taking over the workforce under TUPE legislation (Transfer of Undertakings). Where an Employee is transferring out of the Public Sector and the Employer is exempt from taking our insurance, then both the old and new Employer remain jointly and severally liable for any accidents suffered prior to the transfer.
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