What does employers’ liability and public liability cover?
Employers’ liability insurance protects your employees if they’re injured or contract a disease whilst they are at work. Employers’ liability insurance is compulsory for nearly all employers.
An employer is responsible for the health & safety of their employees and must ensure that they operate a safe place and system of work. If they don’t and an accident occurs, they will be liable to compensate the employee for their injuries.
Public liability insurance covers you against claims from members of the public, for injury or damage to third party property caused by your work. It does not cover injury to employees.
Why does this matter?
Confusion can arise when you use subcontractors. Some subcontractors will be working under your direct control and supervision and will meet the definition of an employed person, requiring to be covered under employers’ liability insurance. Other contractors operate independently and will not be classed or covered as employees.
If you use subcontractors as part of your workforce, you need to make sure that you have disclosed them correctly. You might find a claim is refused if you don’t have Employers’ liability cover.
Declaring your employees and subcontractors
You have a legal duty to declare all material facts that could affect our decision to insure you before you take out your policy. That includes accurately declaring:
• The number of employees you have.
• Whether you use subcontractors or self-employed workers on terms that make them similar to employees. These workers should be disclosed as employees or labour-only subcontractors.
Labour-only subcontractors are treated by the law as being no different to regular employees. The legal liability for the negligence of the labour-only subcontractors, or for injury to them, will usually fall on you, the employer, regardless of whether you agree with this or not. You will need to include them on both your Employers’ and Public liability insurance.
If you don’t declare these accurately, it could mean you’re not paying enough premium for your cover and your claims could be reduced proportionately. As an example, if you’ve only paid 80% of the premium you should have paid, we will only pay 80% of the claim. In extreme cases, where our acceptance limits have been exceeded, failing to declare all employees can lead to claims not being paid at all.
What is a ‘bona-fide’ subcontractor?
A ‘bona-fide’ subcontractor is an independent subcontractor who would not be regarded by the law as your employee. The legal liability for their actions, or injury to their staff, would usually remain with them and they should have their own insurance in place to cover these risks.
Labour-only or bona-fide?
To help you with disclosure, we are providing the following general guidance.
If the subcontractor falls into the left-hand column below, the individuals would meet the policy definition of an ‘employed person’ and should be declared as an employee or as a labour only
subcontractor. If the right-hand column mostly applies, then the individual, or firm, would be considered as an independent, or bona-fide, subcontractor.
A labour only subcontractor:
- Is directed and supervised by you.
- The quality of their work is your responsibility
- General use of the materials and equipment is supplied by you
- Is paid by the hour, day, week or month
- Includes agency workers
- Include people from another business that are “Borrowed”
A bona-fide subcontractor:
- Is an independent business
- Is brought in to complete a job that you can’t do
- Makes own decision over how the job is done
- Has responsibility for correcting unsatisfactory work
- Provides own materials and tools
- Invoices you for the job
- Has their own insurance for them and their employees
It is important to ensure that you have declared all the people working in your business in the most accurate way. Refer to your statement of fact and summary, it’s your responsibility to ensure you are correctly insured. For further questions please call us on 01256 463090.
