IN our continuing series on liability insurance policies, today, we focus on employers’ liability.
Last week we discussed the need for Professional Indemnity, while the other week, we tackled Directors and Officers Liability insurance.
Employers Liability (EL) is a type of insurance taken up an employer to cover indemnity against all sums legally liable to pay for bodily injury or disease to employees arising out of and in the course of employment.
It further covers legal costs recoverable by any claimant and the insured’s legal fees and expenses incurred with the insurer’s consent.
Evidence suggests that several employees get injured, die, or catch the industrial diseases due to the negligence of the employer.
If an employee is disabled or is diagnosed with an industrial disease, they have a legal right to sue the employer.
Legal cases usually involve vast sums of money, including legal fees paid to lawyers. Employers can brace themselves against such hassles by taking up Employers Liability insurance.
There is an ensuing argument on the distinction between Group Personal Accident (GPA) and Employers Liability (EL) insurance policies.
The discussion further questions the relevance of these two liability policies when there is workers compensation compulsory insurance.
Well, the key difference lies in the legal liability or the need to prove negligence.
For a claim to qualify under EL, the employee must prove that the employer was negligent.
The employee must potentially sue the employer and confirm that the employer was negligent, and this must be in the course of employment.
On the other hand, under a GPA policy, the employee does not need to prove negligence.
They only need to prove that they (employees) have been injured in the course of employment.
Whether or not an injury qualifies under a GPA depends on the policy’s type, vis-à-vis, occupational only basis, or 24 hours basis.
As for Worker Compensation, the most straightforward justification for EL is the legal cost aspects and the limits of liability.
For EL, the policy pays for legal costs while workers’ compensation does not. Therefore, cover under EL is wider compared to the one under workers’ compensation. Given the growing litigious tendency, employers need to have EL cover to protect themselves.
EL is commonly arranged on claims made and not on a loss occurring basis.
On claims made policies, the trigger date is when the claim is made, or the insured becomes aware of a claim.
If that date is during the policy period, that policy applies.
The challenge of being made aware after the policy has expired may be reduced by an extension called “extended reporting period.”
The extended reporting might be for a period of say twelve months.
Further, claims made policies usually carry a retroactive date, which may either be the date of policy inception or any date agreed with the insurer.
A retroactive date means that the policy will respond to all losses made during the policy period from that date.
However, if the policy expires, then any claims made will not be honored.
As for a loss occurring basis, the critical policy date is the date of the injury’s occurrence or accident.
If that date is during the policy period, that policy applies regardless of when the accident is reported.
The challenge of loss occurring is that the policy at the time of the loss is the one to pay, even if a claim is made even after the policy has expired.
The main risk to the insured here is where the insurer goes under or winds up. For the insurers, the issue is that they may not have created an appropriate reserve for the loss.
The underwriting requirement for EL includes limits of liability, occupation, type of cover, number of employers, and loss history.
The limits of liability are a critical aspect of this policy as they need to be agreed upon from the policy’s inception.
There is a limit to any one event (AOE) and an Aggregate limit.
Suppose a limit of K500 000 is selected.
In that case, hypothetically, the aggregate limit should usually follow the rule of thumb, which states that the aggregate limit should not be more than four times of the AOE limit.
Higher aggregate limits may be requested, and insurers will advise any implications to the policy.
There is no excess or deductible under an EL policy, as it is a benefit policy. However, some exclusions include fines, penalties, punitive, exemplary or vindictive damages, etc.
The EL policy can be extended to cover food and drink, etc. It is vital to check exact policy provisions with the insurer before effecting cover.
For comments or questions, email w.twaambo@gmail.com or webster@picz.co.zm or visit my Facebook page Webster Twaambo, Jr.