What insurance is compulsory?

Employers’ Liability is one of only two compulsory classes of insurance in the UK, the other being third party motor liability insurance. There are different limits of indemnity available for both covers and we are frequently asked what these should be. Here, we aim to shed some light on this subject. Employers’ liability insurance Under current legislation, an employers’ liability policy must have a minimum limit of £5 million per occurrence or series of occurrences. The insurance market in this country provides a limit of £10 million as standard, but higher limits can be purchased for an appropriate additional premium. Commercial policyholders may wish to reflect on this option should they be engaged in an activity which might be considered hazardous or have high salary earners in a relatively small area of an office.  Examples would include situations where there is a large concentration of employees at any one time such as railways and airports, or where there is a greater risk from the type of industry including construction or manufacturing companies.   Whilst the full limit of liability can be provided by one insurer, cover is sometimes purchased in excess layers. For example:   primary layer £10 million indemnity limit first excess layer £15 million excess of £10 million second excess layer £25 million excess of £25 million  If the business is part of a group, an employers’ liability policy can be taken out for the group as a whole, including subsidiary companies, with the same minimum limit. However, if there are many employees in one location as a result then, as we have already mentioned, the minimum limit may not be adequate.   A certificate of insurance (or a photocopy) must be displayed at all locations where the company conducts business, although it is no longer necessary to keep the certificate for 40 years after expiry.  Third party motor insurance  Under current legislation, third party liability resulting from the use of a motor vehicle is also compulsory, with a minimum limit of £1million for property damage but unlimited as far as personal injury is concerned.  All UK insurers satisfy the injury criteria and generally impose a limit for property damage of £20 million under a private car policy, with a smaller limit of £5 million for commercial vehicle policies although, again, this limit can be increased on application.  Examples where increased limits might be required would be for hauliers or logistics companies operating HGV’s or car transporters and such like, where the potential for large claims is increased due to the size, weight or load of the vehicle.   A certificate of insurance is issued for each vehicle (or blanket certificates for fleet policies) although their importance will diminish over time as the police can now log into a national database for confirmation of insurance on any vehicle, and it is possible to renew a road fund licence online without the need to produce the certificate.  What about public liability insurance?  There is a common misconception surrounding this class of insurance. There is actually no legal obligation to have public liability insurance, although there are certain minor exceptions to this rule (e.g. riding establishments or individuals in possession of wild dangerous animals or dangerous dogs).  Of course, in the business world, it is prudent to have adequate cover in order to protect against legal liability arising for death or bodily injury to third parties or loss or damage to their property. Such cover is more often than not a contractual requirement in any event. Liability can result through:   Operation of the business Actions of employees whilst in the course of their business Defects in the premises  It is now common for £5 million to be the minimum indemnity limit selected. Medium to large companies with diverse business interests are likely to require indemnity limits much greater than this and, for example, in the case of companies involved in manufacturing, construction or major retailers, where there could be an accumulation of people at any one time or hazardous activity being undertaken, limits varying from £10 million to in excess of £100 million would be more appropriate.   In view of the lack of compulsion, insurers do not issue certificates of insurance in addition to the actual public liability policy. However Centor, as independent brokers, will always issue an appropriate certification of cover when requested.     If you have any queries concerning this topic please do not hesitate to contact Rob Wilson (Corporate Risks Team Manager) or speak to your usual Centor contact.