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Employer's Liability Insurance

Employer's Liability Insurance

Employer's Liability Insurance offers protection to you and your business, in the event of any liability arising from injury or illness sustained by anybody who is employed by you. Employer's Liability Insurance also enables employees injured as a result of an employer's negligence to seek compensation, even if the business goes into liquidation or receivership.


The following are covered by Employer's Liability Insurance:

  • Cover for claims made against you if an employee's killed, injured or contracts an illness or disease whilst working for you in connection with your business.
  • Employer's Liability Insurance also covers you for the claimant's costs and expenses plus the cost of your legal representation at a Coroner's Enquiry, and in any Court proceedings made against you by an employee.
  • Costs and expenses incurred in the defence of a prosecution relating to the welfare of employees under the Health and Safety at Work Act 1974. This is also extended to cover the Education (Work Experience) Act 1973.


Failure to arrange Employer's Liability Insurance could lead to one or all of the following:

  • You could lose your business: a liability claim against your business could be huge and could lead to damages of millions of pounds being awarded against you. For most businesses this would spell financial ruin.
  • You could also be held personally liable and even face criminal charges if you are found to have acted negligently.
  • You risk being fined up to £2,500 for each day that you do not have the appropriate insurance by the Health & Safety Executive (HSE).


In general, you need Employer's 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, performancepay 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.

It may be on a part-time basis, a full-time employee, students on work experience courses, a self- employed sub-contractor, a person working on a trial basis and even voluntary workers. All are technically employed by you, because they are under your instruction and working for you.


Employer's Liability Insurance became a legal requirement in 1972 as a direct result of the 1969 Employer's Liability Act. The current minimum legal requirement is £5m of cover against bodily injury, illness or disease sustained in the course of employment.


An employee who quit after being asked to re-locate, despite having a mobility clause expressly stated in his contract of employment, has been successful in suing his former employer for constructive dismissal. The employee was asked to move from Leeds to Birmingham with immediate effect. He requested that this was delayed for 3 months on the grounds that his wife was ill at the time. The employer refused this request and the employee quit and claimed to have been constructively dismissed. The court upheld his claim stating that the mobility clause had been inappropriately exercised. UK Courts often seek to do “justice” to contractual terms by implying conditions where there might previously have been none. This is an obvious risk to employers.

A female employee subjected to offensive remarks and fondling at an office party has been successful in a liability case against her employer. Despite the party being held out of office hours and away from office premises, the court held the employer liable, as the party was something that the employee was expected to attend and therefore it was an element of office life.

An accountant sacked for gross misconduct after warning his directors that his former chief executive had claimed £371,000 in cash advances and expenses without receipts has been awarded substantial damages. The Public Interest Disclosures Act allows "whistleblowers" to recover more than the normal £50,000 limit, and as suchhe was awarded £293,000 compensation for unfair dismissal.

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