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  • Is your employers' liability insurance sufficient?

    The changes to the Ogden discount rate back in March have had a major impact on the insurance industry. The Ogden Rate is used by the legal profession to calculate the value of claims for catastrophic injuries. The rate went from +2.75% to minus 0.75%. How the rate works it that the lower the rate, the more money you need to give someone to generate a pre-determined level of future income. As a result, the cost to a business in terms of catastrophic claims will increase significantly.

    The standard limit for Employers’ Liability Insurance is £10m, which includes legal costs. Often however, larger firms, or those in different industries buy more than this if they have many employees or work in hazardous environments. With the changes to the Ogden Rate a £10m limit is unlikely to be adequate for a single person.  

    For example, an 18 ear-old employee suffering a spinal injury that requires care for their remaining life could have previously been awarded £7.6m. But with the changes to the discount rate this would now be closer to £19.3m which will far exceed the current £10m limit.

    In this situation, your business is severely underinsured and will be responsible for paying the balance remaining on damages and legal costs. Fortunately, catastrophic incidents are rare but they do happen and could render your business bankrupt. Imagine also the possibility of a claim involving two or three or more of your employees.

    What should you do to protect your business?

    Great care should be taken when choosing your limits of indemnity. Following the changes to discount rates, many businesses will now need a higher limit to meet their needs. The potential for single claims to exceed £10m is a real possibility and so the following six points should be considered when reviewing your level of cover with your insurance broker.

    1.    Multiple claimants

    The usual £10m limit applies to each individual claim under the Employers’ Liability Insurance. However, there is always the potential that a single cause of a claim could affect multiple employees. A number of claims resulting from a single cause are considered to be one loss. It is therefore important to consider if your limit is sufficient to cover the possibility of multiple claimants following the same incident.

    2.    Concentration of staff

    When your workplace has employees concentrated in one area (such as an office or building site) then there is more chance of an incident affecting more than one employee. In these situations, you should consider higher indemnity limits.

    3.    Nature of activities

    Those employers’ liability cases with higher value claims tend to come from injuries where continuous care is required, rather than a death scenario. It is a good idea to review the nature of activities that your staff engage in to get a better estimate on claim potential. Such activities may involve things like working at heights.

    4.    Hazardous locations

    Some locations are more hazardous than others and therefore more prone to incidents as well as being more likely to involve greater numbers of people. Such locations could include production lines, railways and construction sites. If your workplace is in a hazardous location then you should consider higher indemnity limits.

    5.    Inner limits

    Most Employers’ Liability Policies have limitations, such as incidents arising from terrorism, which may be limited to a minimal claim. It is important to check for any inner limits on your policy and consider them against yours or your customers’ activities.

    6.    Future circumstances

    Many Employers’ Liability claims come up years after the incident occurred, such as work-related diseases that may manifest over time. During this time much could have changed to affect the final settlement figures and it is therefore important to add in contingency for this and to review your policy annually.

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