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11/12 M97/February 2018 Reinsurance

D Employers’ liability

EL insurance is compulsory and was born out of State intervention into the area of compensation for
EL insurance is
compulsory accidents and illness at work.
The Employers’ Liability (Compulsory Insurance) Act 1969 states that all employers conducting business
in the UK, except central and local government, the police, the civil service, nationalised industries and
businesses solely employing family relations, must insure against ‘liability for bodily injury or disease
sustained by its employees and arising out of and in the course of their employment’ and be with an
authorised insurer.

The Act prevents policies being subject to ‘prohibited conditions’ which would allow insurers to
repudiate claims for, for example, failure to notify the insurer of a claim within a stipulated time, or
failure on the part of the employer to take reasonable care to protect his employee against the risk of
bodily injury or disease in the course of employment. However, insurers can reclaim compensation paid
to employees from the insured employer where usual insurance conditions have not been complied with.

D1 Extent of cover and exclusions

Most EL insurance policies use the wording of the Act to define the extent of cover provided, the key
Most EL insurance
policies use the phrases being:
wording of the Act to
define the extent of • Employees: defined as ‘any person under a contract of service or apprenticeship’ with the insured as
cover provided
witnessed in the master/servant relationship. There are various legal precedents attempting to define
who is a ‘servant’ when many people are working as contractors, temporary employees and so on. A
contract for services does not involve a master/servant relationship and the person is simply
performing particular tasks for a fee.
• Arising out of and in the course of their employment: death, illness or disease must be a result of an
accident, for example, sustained by the employee whilst carrying out their employment. This is a
question of fact.

In the UK cover is compulsory for £5m in respect of claims relating to any one or more employees arising Reference copy for CII Face to Face Training
out of any one occurrence.
All subsidiaries can be covered by one policy of at least £5m. Commonly, indemnity is now given for a
primary £10m with an option to purchase higher excess layers if appropriate. Costs are included within
the policy limit. There is no limit to the number of occurrences that may give rise to losses during the
currency of the original policy. Reinsurance is generally bought to respond accordingly.
Be aware
Any number of qualifying accidents could take place during one period of insurance and, subject to the indemnity
limit applying to any one occurrence, the insurer would be liable on each occasion.

Liability arises mainly in tort although sometimes in contract, where there may be the accumulation of
Liability arises mainly
in tort claims from a number of employees involved in a major incident, or where individual employees claim
for bodily injuries sustained in separate events.

D2 Underwriting considerations
Refer to section E Much of the information that is required for EL insurance would also be needed for workers’
for workers’
compensation compensation. In addition the following items are required:
• Any schedules of the benefits specified in the workers’ compensation statutes of the countries in
which the reinsured is operating.
• A clear understanding of whether any benefits can be increased retroactively. It is important, in
assessing their potential liability, for reinsurers to be aware, when benefit limits are increased,
whether the new limits will apply only to workers sustaining injury after the date of the benefit
increase or also to existing claimants.
• Details of any situations that give rise to accumulations of employees in hazardous environments.
• A policy profile that shows limits and attachment points if the insured is writing excess layers.

In the USA, EL policies have been increasingly under attack by employees suing their employers for
Coverage under US
11 policies is wider alleged discrimination on the basis of sex, race or religious beliefs. The coverage under US policies is
wider than that found in UK policies and hence the possibility of recovery under these policies.
Chapter