Claims on Employer’s Liability Insurance which exceed the statutory minimum policy limit (£5 million) are currently rare, and consequently, for many policyholders purchasing a higher limit is not an immediate consideration.
However, the Association advises that all members should review their Employer’s Liability policy limit as a result of the direction given to courts in February 2017 as to how to apply a discount rate on personal injury damage awards to adjust for a low-risk investment return.
The rate is called the ‘Ogden Discount Rate’ and it is used to calculate the value of claims for catastrophic injuries. Following an announcement by the Lord Chancellor, the rate was reduced from +2.5% to -0.75%. This change has a significant effect in many cases, nearly doubling the final settlement amount awarded by the courts.
Since this change was announced, various articles have been published intimating the current levels of Public Liability and/or Employer’s Liability cover may no longer be sufficient to provide adequate protection for policyholders.
Each case will be determined on its own merits. Therefore the advice we give to all potential insurance policyholders is that careful consideration does need to be given to this issue and the decision on the levels of cover required must rest with each individual company based on the perceived risks/hazards they face. The main factors which will affect your decision regarding cover levels on this include:
- the type of activities your business carries out: are these at ‘high risk’ of causing injury?
- the areas where work is normally undertaken: are they heavily populated?
- the number of operatives you have in a single place at any one time
- do you employ staff or use self-employed contractors?
It is important for members to regularly review and discuss liability insurance levels with their brokers to ensure the level of cover reflects the full range of their business’s activity: your insurance broker will advise on the appropriate products to suit your business need. In summary – talk to your broker!
This article was taken form Issue 186 Autumn 2019 of the ARB Magazine, which is available to view free to members by simply logging in to the website and viewing your profile area.