Liability insurance

Employers' liability insurance

Employers' liability (EL) insurance enables businesses to meet the costs of damages and legal fees for employees who are injured or made ill at work through the fault of the employer. Employees injured due to an employer's negligence can seek compensation even if the business goes into liquidation or receivership. The NHS can also claim the costs of hospital treatment (including ambulance costs) when personal injury compensation is paid. This applies to incidents that occur either on or after 29 January 2007.

Read about the Injury Costs Recovery Scheme on the Department of Health (DoH) website - Opens in a new window.

By law, an employer must have EL insurance and be insured for at least £5 million. Most insurers automatically provide cover of at least £10 million. Your EL insurance must cover all your employees in England, Scotland, Wales and Northern Ireland.

If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory ELCI. Limited companies with only one employee, where that employee also owns 50 per cent or more of the issued share capital in the company, are also exempt from compulsory EL insurance. However, there is nothing to prevent an exempt employer from choosing to buy EL insurance, and many do, in view of the financial security it can provide.

The Health & Safety Executive (HSE) is responsible for enforcing the law on EL insurance. You can be fined up to £2,500 for each day that you do not have appropriate insurance.

Generally, someone is defined as your employee if:

• they are under a contract of service
• you deduct National Insurance contributions and income tax from the salary you pay them
• you control when, where and how they work
• they cannot employ a substitute when they are unable to work

Many EL policies available in the market will contain a wide definition of employee that will cover most circumstances.

Download a guide to EL insurance from the HSE website (PDF) - Opens in a new window.

Useful checks

Your policy must be issued by an authorised insurer otherwise it will not be valid and you risk breaking the law. You can check that an insurance provider is a member of the Association of British Insurers on the ABI website - Opens in a new window. Your insurance broker can also tell you which companies offer suitable EL insurance policies.

Displaying your EL compulsory insurance certificate and HSE inspections

When you take out a policy you will receive a certificate of employers' liability compulsory insurance.

You must display a copy of this document where employees can easily read it. You can display it either:

• as a paper copy, eg as a photocopy pinned to a notice board
• electronically, eg as a page on your intranet or as a document in a shared folder on your network

You also need to make these certificates available to health and safety inspectors on request.

If you do not display your EL compulsory insurance certificate or refuse to make it available to HSE inspectors when they ask, you can be fined up to £1,000.

You are strongly advised to keep, as far as is possible, a complete record of your employers' liability insurance. This is because some diseases can appear decades after exposure to their cause and former or current employees may decide to make a claim against their employer for the period they were exposed to the cause of their illness. If you fail to hold the necessary insurance details you risk having to meet the costs of such claims yourself.

Subjects covered in this guide

• Introduction
• How liability insurance works
• Employers' liability insurance
• Public liability insurance
• Product liability insurance
• Insurance against pollution damages
• Property owners' liability insurance
• Professional indemnity insurance
• Directors' and officers' liability
• Seek specialist advice
• Here's how I checked what insurance I need

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