Health & Safety
Employer’s Liability (Compulsory Insurance) Act 1969 (2)
A guide for employers
This page contains notes on good practice which are not
compulsory but which you may find helpful in considering what you
need to do.
Most employers are required by the law to insure against
liability for injury or disease to their employees arising out of
their employment. This guide is intended to help you to understand
what is required. It is not a legal interpretation of the
Employers’ Liability (Compulsory Insurance) Act and it has no legal
status. You should be aware that only the courts can
authoritatively interpret the law.
What is Employers’ Liability Insurance?
You are responsible for the health and safety of your employees
while they are at work. Your employees may be injured at work, or
they or your former employees may become ill as a result of their
work while in your employment. They might try to claim compensation
from you if they believe you are responsible. The Employers’
Liability (Compulsory Insurance) Act 1969 ensures that you have at
least a minimum level of insurance cover against any such
claims.
Employers’ liability insurance will enable you to meet the cost
of compensation for your employees’ injuries or illness whether
they are caused on or off site. However, any injuries or illness
relating to motor accidents which occur while your employees are
working for you, may be covered separately by your motor
insurance.
Public liability insurance is different. It covers you for
claims made against you by members of the public or other
businesses, but not for claims by employees. While public liability
insurance is generally voluntary, employers’ liability insurance is
compulsory. You can be fined if you do not hold a current
employers’ liability insurance policy which complies with the
law.
Do I need employers’ liability insurance if my employees
work abroad or my company is based abroad?
If any of your employees are normally based in England, Scotland
or Wales (including offshore installations or associated
structures) you must have employers’ liability insurance.
You do not need employers’ liability insurance under English law
to cover any of your employees who are based abroad (eg. if they
are on secondment). However, you should check whether the law in
the country where they are based requires you to take out insurance
or take any other measures to protect your employees.
If any of your employees are normally based abroad but spend
more than 14 days continuously in Great Britain, or more than seven
days on an offshore installation, you will need employers’
liability insurance under English law.
Which insurance companies can sell me employers’
liability insurance?
You must use an authorised insurer. If you do not, you may be
breaking the law. You should check that your insurer is authorised
before you take out employers’ liability insurance.
Authorised insurers are individuals or companies working under
the terms of the Financial Services and Markets Act 2000. The
Financial Services Authority (FSA) maintains a register of
authorised insurers. You can check whether a company is authorised
by searching their register on www.fsa.gov.uk, or telephoning the
FSA on 020 7066 1000.
Can my insurance policy contain conditions?
If you take out employers’ liability insurance, you will have an
agreement with your insurer about the circumstances in which they
will pay compensation. For example, the policy will cover the
specific activities that relate to your business.
There are certain conditions which could restrict the amount of
money your insurer might have to pay, which you cannot agree and
your insurer cannot impose. You should make sure that your contract
with your insurer does not contain any of these conditions.
Your insurer cannot refuse to pay compensation purely
because:
- you have not provided reasonable protection for your employees
against injury or disease;
- you cannot provide certain information to the insurer;
- you have done something they told you not to do (for example,
said it was your fault);
- you have not done something they told you to do (for example,
report the incident);
- you have not met any legal requirement connected with
protection of your employees.
However, this does not mean you can forget about your legal
responsibilities to protect the health and safety of your
employees. For example, you must carry out a risk assessment, take
practical measures to protect your employees and report incidents.
If your insurer believes that you have failed to meet your legal
responsibilities for the health and safety of your
employees and that this has led to the claim, the policy may
enable the insurer to sue you to reclaim the cost of the
compensation.
Can the insurer make me pay part of any claim for
compensation?
Your insurer must pay the full amount of any compensation agreed
with your employee or former employee or awarded to them by a
court. Your insurer cannot impose conditions which make you, your
employee or your former employee pay part of any claim. However,
you can agree with your insurer that you will pay back to them part
of any compensation which they have paid to your employee or former
employee.
How much cover will I need?
You must be insured for at least £5 million. However, you should
look carefully at your risks and liabilities and consider whether
you need insurance cover of more than £5 million. In practice, most
insurers offer cover of at least £10 million.
If your business is part of a group, a policy for employers’
liability insurance can be taken out for the group as a whole. In
this case, the group as a whole, including subsidiary companies,
must have cover of at least £5 million.
You can have more than one policy for employers’ liability
insurance. However, the total value of the cover provided by the
policies must be at least £5 million. You should bear in mind that
the £5 million minimum level of cover includes costs, so you may
wish to purchase cover of more than this.
Do I need to tell my employees that I have employers’
liability insurance?
When you take out or renew a policy, your insurer will give you
a Certificate of Employers’ Liability Insurance. This must state
clearly the minimum level of cover provided and the companies
covered by the policy. You must display a copy of the Certificate
of Insurance where your employees can easily read it.
If you have employees working in the Isle of Man, Jersey,
Guernsey or Northern Ireland as well as in England, Scotland or
Wales you can use the same certificate in all locations. However,
you must check that this complies with any local requirements as
well as English law.
If your employees work on offshore installations or associated
structures, you do not need to keep a copy of the certificate on
every installation. However, if one of your employees asks to see a
copy of the certificate, you must provide one as soon as possible
and certainly within ten working days of their request. You can
provide a copy by fax if this is easier for you.*
Does the law apply to me?
You need employers’ liability insurance unless you are exempt
from the Employers’ Liability (Compulsory Insurance) Act. The
following employers are exempt:
- most public organisations including government departments and
agencies, local authorities, police authorities and nationalised
industries;
- health service bodies, including National Health Service
trusts, health authorities, primary care trusts and Scottish Health
Boards;
- some other organisations which are financed through public
funds, such as passenger transport executives and magistrates’
courts committees;
- family businesses, ie. if your employees are closely related to
you (as husband, wife, father, mother, grandfather, grandmother,
stepfather, stepmother, son, daughter, grandson, granddaughter,
stepson, stepdaughter, brother, sister, half brother or half
sister). However, this exemption does not apply to family
businesses which are incorporated as limited companies;
- companies employing only their owner where that employee also
owns 50% or more of the issued share capital in the company.
* The requirements described in this paragraph came into force
on 1 January 1999. Employers’ Liability (Compulsory Insurance) Act
1969
Further exemptions from the need to have employers’ liability
insurance are listed at section 3(1)(a) and section 3(1)(b) of the
Employers’ Liability (Compulsory Insurance) Act 1969, and Schedule
2 to the 1998 Regulations.
Do I need employers’ liability insurance for all the
people who work for me?
You are only required by law to have employers’ liability
insurance for people who you employ. However, people who you
normally think of as self-employed may be considered as your
employees for the purposes of employers’ liability insurance.
Whether or not you need employers’ liability insurance for
someone who works for you depends on the terms of your contract
with them.
This contract can be spoken, written or implied. It does not
matter whether you usually call someone an employee or
self-employed or what their tax status is. Whether you choose to
call your contract a contract of employment or a contract for
services is largely irrelevant. What matters is the real nature of
your relationship with the people who work for you and the degree
of control you have over the work they do.
There are no hard and fast rules about who counts as your
employee for the purposes of employers’ liability insurance. The
following paragraphs may help give you some indication. However, if
you have any doubts you should seek legal advice.
In general, you may need employers’ liability insurance for
someone who works for you if:
- you deduct national insurance and income tax from the money you
pay them;
- you have the right to control where and when they work and how
they do it;
- you supply most materials and equipment;
- you have a right to any profit your workers make although you
may choose to share this with them through commission, performance
pay or shares in the company. Similarly, you will be responsible
for any losses;
- you require that person only to deliver the service and they
cannot employ a substitute if they are unable to do the work;
- they are treated in the same way as other employees, for
example, if they do the same work under the same conditions as
someone you employ.
- In general, you may not need employers’ liability insurance for
people who work with you if:
- they do not work exclusively for you (for example, if they
operate as an independent contractor);
- they supply most of the equipment and materials they need to do
the job;
- they are clearly in business for personal benefit;
- they can employ a substitute when they are unable to do the
work themselves;
- you do not deduct income tax or national insurance. However,
even if someone is self-employed for tax purposes they may be
classed as an employee for other reasons and you may still need
employers’ liability insurance to cover them.
In most cases you will not need employers’ liability insurance
for volunteers. Although, in general the law may not require you to
have insurance for:
- students who work for you unpaid;
- people who are not employed, but taking part in a youth or
adult training programme; or
- a school student on a work experience programme.
It is advisable to inform your insurance company if you take
on:
- volunteers;
- students who work for you unpaid;
- people who are not employed but are taking part in youth or
adult training programmes; or
- school children on work experience programmes.
You may require insurance cover for any of the above and should
bear in mind the level of risk they may be exposed to during the
time they are working for you. It may be necessary for you to carry
out a separate risk assessment or take special measures for those
listed above.
One difficult area is domestic help. In general, you will
probably not need employers’ liability insurance for people such as
cleaners or gardeners if they work for more than one person; nor
are you likely to need it if you employ a childminder. However, if
you employ someone who works only for you, you may be required to
take out insurance to protect them.
Do I need to keep copies of certificates of insurance
which are out of date?
You must retain for at least 40 years copies of certificates of
insurance which have expired. This is because claims for diseases
can be made many years after the disease is caused. You can keep
copies electronically if this is more convenient than paper copies.
You must make these available to health and safety inspectors on
request.
These requirements apply only to policies which were in force on
31 December 1998 or later. However, it is still very important to
keep full records of your previous insurance policies for your own
protection in case any of your employees make claims relating to
injuries or illness caused in the past.
What happens if I do not have employers’ liability
insurance?
The Health and Safety Executive (HSE) enforces the law on
employers’ liability insurance and HSE inspectors will check that
you have employers’ liability insurance with an approved insurer
for at least £5 million. They will ask to see your certificate of
insurance and other insurance details.
You can be fined up to £2500 for any day which you are without
suitable insurance. If you do not display the certificate of
insurance or refuse to make it available to HSE inspectors when
they ask, you can be fined up to £1000.
Where can I go for further information?
If you want further information and advice about anything in
this leaflet you can get in touch with your local HSE office. You
can find their address and telephone number under Health and Safety
Executive in the telephone directory. Or you can get in touch with
the Department for Work and Pensions; contact details for
employers’ liability insurance issues are at the end of this
page.
If you need legal advice, for example, if you are unsure about
whether someone is your employee, you can consult a solicitor or go
to a legal centre or a Citizens’ Advice Bureau.
Further information
DWP
Employers’ Liability Compulsory Insurance (ELCI)
Level 2, The Adelphi, 111 John Adam Street,
London WC2N 6HT Tel: 020 7712 2745
9.00 am – 5.00 pm Monday to Friday
Fax: 020 7962 8524
Email: EmployersLiabilityInsurance@dwp.gsi.gov.uk
HSE priced and free publications are available by mail order
from:
HSE Books, PO Box 1999, Sudbury, Suffolk CO10 2WA
Tel: 01787 881165
Fax: 01787 313995
Website: http://www.hsebooks.co.uk/ (HSE
priced publications are also available from bookshops and free
leaflets can be downloaded from HSE’s website: http://www.hse.gov.uk/.)
For information about health and safety ring HSE’s Infoline Tel:
0845 345 0055 Fax: 0845 408 9566 Textphone: 0845 408 9577 email:
hse.infoline@natbrit.com or
write to HSE Information Services, Caerphilly Business Park,
Caerphilly CF83 3GG.
Contact Environmental Health
E-mail: envhealth@dover.gov.uk
