This article is authored by Magaonkar Revati, from Dayanand College of Law. This article is dealing with a brief study and analysis of the Employer’s Liability Insurance and its impact during the pandemic.

Introduction

Employers liability insurance is one of the kinds of business insurance which is provided for the ‘Employers’. In most places employers are legally bound to have the employer’s liability insurance,  it gives protection to the employers as the policy covers the statutory liability of an employer for death, any bodily or an occupational injury sustained by him inside or outside of his course of employment. It also covers the loss if any worker has sustained a work-related injury or any illness which is not covered under the worker’s compensation. Employers liability insurance can combine with workman compensation insurance as it is a part of the workmen’s compensation for protecting companies from any cost which arises out of injuries to the workplace, illness and deaths as mentioned above.

In simple words, “If an employee files a suit for an injury, this policy will help the employer to pay the legal costs incurred to him. But when an employee gets his workers’ compensation benefits, workers most of the time agree upon not suing their employers for compensation”.

Concept of an employer’s liability

Definition

An employer’s legal responsibility to give or pay the damages to an employee who has sustained injuries or has contracted with illness because of the work he/she performs.

Meaning

‘Employers liability’ is a legal responsibility of the employer towards his/her employees for any problems, accidents or any mistakes done by them during the period when they were working for the employer.

Therefore, in all sectors, companies, business employers are bound by law for the protection and safety of their employees, so when one fails to do so he/she is under an obligation to pay compensation to those employees.

The employer is responsible to give compensation to his workers when an employee has sustained injuries or any disease because of the negligence of the employer. When the employer is not looking towards the safety measures for any types of machinery used in the manufacturing or production of goods and services which can be operated by the employee if any accident occurs out of it then in that situation the employer is liable to pay compensation for injuries sustained by the worker/employee. If he fails to do so an employee can sue him in the court of law.

Vicarious Liability

Businesses are not only liable for their actions but also the act was done by their employees during work, known as ‘Vicarious Liability’.

The liability, responsibility involves compensation for any loss, expenses incurred, loss of earnings or future earnings, pain or injuries and suffering from any other things. Even when the employer is not liable for the loss or injury incurred to an employee, the costs or expenses involved in taking legal advice or in defending an action in court is enough. 

Therefore, the insurance for employer liability is the best option available for such situations, so that the employer can surely pay the compensation for the injury or loss that occurred to the employee. Employers liability insurance is one of the compulsory laws in the United Kingdom. 

Mandatory insurance requirements first came into force in the Employer’s Liability Act, 1938 after the enforcement of this Act it became mandatory to also employers’ to get insured for any loss or bodily injury, disease sustained by any employee during the work hours. 

The main object of the Act is to point out such defences which shall not be included in suits for damages or compensation by the employees. Section 2(b) of the Act deals with the meaning of the word employer and some other provisions for employer liability that arises out of injury or damages sustained to the employee.

Insurance

Insurance is an arrangement by which a company or state commits to providing a guarantee of compensation for a particular loss, damage, disease or even death sustained by any person, business, company, property, etc., in return for the specific or certain premium.

In other words, it is a term of law and economics. It can also be said as something that people mostly acquire to protect and secure themselves from losing money for which they buy insurance premiums and pays money in the specified format. If something bad happens in return for the insurance premium, the person or whoever has bought it, the company or state who has sold the insurance will pay the money to them.

There is no specific definition for insurance, many eminent persons have explained it in various ways.

It can also be said that the contract has a representation of the policy in which a person or entity gets financial protection or reimbursement for the loss from an insurance company.

There are different kinds of insurance policies available, today one can buy a policy virtually and can pay a premium virtually. There are specific insurance policies for all types of businesses. 

Kinds of insurance policies

• Life insurance
• Fire insurance
• Marine insurance
• Medical insurance
• Property insurance
• Liability insurance

Difference between Workmen’s compensation and Employers Liability

Workers Compensation (WC)

• The workers’ compensation policy mainly points out and covers what are the requirements by law for the business, industry or company in the specific area of the work.
• In WC when there is no state’s regulatory workers compensation fund one has to buy the WC from a private company or a commercial insurance policy.
• In some of the places or states, this policy covers certain injury costs and in some other states it’s base is each employee’s salary.
• It provides the coverage or insured amount to employees who have suffered an injury during the time of working without any fault.
• It is a state-mandated plan and one of a form of no-fault insurance but the employee has to show that they have sustained hurt while performing his/her duty, it is not necessary here to prove the negligence of the employer.
• It covers the costs including medical expenses and partial wage loss.
• It doesn’t cover any costs or loss allied with suffering or pain.

Employers Liability (EL)

• Employers’ liability provides cover if an employee feels that the provided worker’s compensation is not enough to recover loss and cover medical expenses or lost wages.
• In EL the employee has to show the injury sustained during work and should also mention that the injury may not have happened if there was no negligence by the employer.
• EL covers all types of employers liability claims unless it has been excluded from the policy.
• It involves four of the most common lawsuits as follows: 

Third-party cases

In such a case a third-party / person is held liable for the injury sustained to the employee so in turn that person files a suit against the employer for contributory negligence.

Loss of association

When an employee dies during work the spouse of that employee can sue the employer for compensation for loss of services, support and quality in the relationship of marriage.

Consequential injury to the body

If the injured employee’s family members suffer from any bodily injury themselves because of stress for the injured employee, they can sue the business.

Double capacity suit

When an employee sustains an injury due to the product his/her employer creates, in such case an employer is liable as a manufacturer and employer. In such cases, employers can cover companies legal defence fees, settlement and other court fees.

• The employee must show that the employer was negligent to prove the claim.

The Constitution of Employers’ Liability 

During the first Employers Liability Act of June 1906, Congress had extended the nationwide protection to the railroad making workers against the common law for arsenal, the defendant employer had used so effectively to defeat the personal injury suits.  

This Act made every common bearer engaged in interstate commerce liable to its employees for all damages resulting from negligence.

Also, contributory negligence would not bar recovery and the law directed juries and not the judges to decide questions of negligence and to judge damages proportionally.

This Act also prohibited the use of insurance or its other benefits as a defence against the damage suits.

The Supreme Court in the ratio of 5/4 declared this particular Act unconstitutional by the reason of the extension of railroad employees not to engage in the commerce of interstate, so congress passed the second form or version of the Act in April 1908. Therefore, the new Act covered only employees working in interstate commerce by adding several sections congress protected employees and extended the period of limitation on actions from one to two years. 

Additional information about Employers’ Liability

Except for the provisions given under the Employer’s Liability Act, 1938, the employer is not liable to pay compensation under the following circumstances:

• Injuries sustained did not result in lifetime incapability or incapacity to do the employee’s normal work.
• When the sustained injury has occurred by the own act of an employee to get rid of the work, knowing future disadvantages.
• When the injury has sustained because of drunkenness or any other toxic consumption.
• Injury sustained when the employee was off duty and was out of the workplace on a holiday.
• When the injury sustained out of an employee’s quarrels, fight with the outsider person which he took to the workplace.

Some other provisions of the Act state that, when any suit for compensation or damages has been filed by an employee for an injury suffered at the workplace which has occurred out of his/her negligence towards his health or from any disease which he had occurred even before he joined the employer’s workplace.

Limitations of Employer’s Liability Insurance 

• Even as the Employers Liability Insurance provides great support to the employer while paying compensation to the employees, there are also certain limitations to it that the employer has to face like the complication in the insurance policy. 
• Some issues arise out of lawsuits and it costs so much which is a major financial loss for the employer himself, because of this issue so many employers take the employer’s liability insurance which helps them through lawsuits with its cover.
• It also gives insurance cover to the employer when the employee claims the compensation on the ground of discrimination of sex, caste, age, etc. and harassment or by giving any imaginary reasons creating on their own. 
• When the employer with intentions makes the employee suffer more with his work injuries, illness the employers’ liability insurance will not cover such injuries as here the employer is solely liable and obliged to the employee financially, he must have to pay compensation to him when the court orders.
• Employers’ liability insurance also has limitations on how much they pay, for which reasons and to whom.
• Whenever a person purchases a workers’ compensation insurance policy, there’s a coverage called employers liability insurance is also included.
• This type of insurance is not used often in most of the states as it makes a very small part of the workers’ compensation insurance premium.

Limitation of the insurance that stated in the declaration page or pages has the limit of employer’s liability for all the compensatory damages while including compensatory damages for care and loss of services and any loss arising out of a bodily injury sustained by any employee or more than one employee.

Under the compulsory insurance requirements first, it was laid down in the Employers’ Liability (Compulsory Insurance) Act, 1969. All employers’ who have certain limited exceptions, should get insured against liability for the bodily injury or any disease sustained by their employees arising out of and in the course of the duty or employment.

The Pandemic and Employers’ Liability

It has been a huge effect of the pandemic on the employers’ liability in 2019 due to the COVID-19. It has not only raised the fear in people’s minds of people but also created a question on how insurance policies like employers liability will or will not respond. 

There are innumerable examples of employees believing that they have contracted with COVID-19 at the workplace, which raised several employers’ liability considerations to come into play. 

In terms of the COVID-19 claims, all cases have evaluated on a case-by-case basis and the insurance cover may only be given if certain points have proved, such as:

1. The disease or illness has sustained at the workplace and in the scope of employment.
2. The illness or disease in question has sustained within the conditions particular to the work and not because of the ordinary disease like a normal cold.

While making the claims for COVID-19 it is really necessary to consider that the situation varies from place to place. 

Any such employers that are dealing with COVID-19 regularly, here employers liability claims shall be reported to the qualified insurance professionals.

While reporting the probable claims the following points shall be considered: 

• Including the COVID-19 in the details of the situation.
• Investigation of the incident mentioned. It shall report whether the worker or employee claiming the policy has come into contact with a person infected with the said disease, also when that employee started experiencing the symptoms of the said disease and whether he/she had tested positive for the disease.
• It shall be determined that workers have fallen ill from any of their friends or family.
• Further details of the employee about his perceived level of risk from the said disease shall be reported.
• There shall be real documents including showing the security measures taken by the organization to protect its employees from the said disease. For eg. Cleaning and sanitation, etc.

Workers’ compensation

Workers compensation is a system under which an employer is bound to pay or to give him insurance for the missing wages and other medical expenses of an employee who has faced injuries at the workplace. 

The law of Workmen’s Compensation (WC) has operated and governed in most of the states. All the particular laws change from state to state with the jurisdictions but the main aim of it remains the same consistently.

A worker or employee is directly entitled to avail certain benefits available for him/her when they suffer from an occupational disease or accident during work hours. 

WC benefits may include benefits of cash or wage loss, career rehabilitation, benefits to dependents of an employee in case of accidental death, importance to the fact that negligence of either employer or employee is not usually given. In some of the states agricultural and domestic workers are partially included and partly excluded from these benefits. 

Section 3 of the Workmen’s Compensation Act, 1923 deals with the liability of the employer to pay the compensation to the employee for loss, injury or disease sustained during the period of work.

The main object of the WC is to return the injured employees’ loss quickly with possible ways which are available under WC as in form of finance so that employees will be able to return to their productive status without even harming the specific employers business.

When a worker receives the cover for injury incurred to him/her under WC, then after he cannot sue the employer for that specific injury, but if there was a third-party involved in the cause of work injury to the employee then he/she can sue that specific third person for their negligence. 

In such matters when the plaintiff receives any compensation from that third-party from the order of the court, that suit must repay the employer/insurer first for that paid employee’s WC benefit and the plaintiff/injured employee can keep the remaining money, or even the employer of the insurer can sue that third-party for recovering the WC benefits given to an injured employee.

Workmen’s Compensation statute has to buy the private or state-funded insurance or his self-insurance so that he can pay the injured employee certainly without any mischief and delay. Insurance costs directly show the cost of produced goods and services of the employer, so that cost of Workmen’s Compensation Liability departs in the end to customers.

The Workmen’s Compensation statute plays an important role for workers who are making so much effort even for their bread and butter and cannot afford such losses and injuries on their own.

Liability insurance

Liability insurance is a term that refers to an insurance product that gives or provides protection to an insured party from claims resulting from injuries and damages to the other people or the specific property. The liability insurance policy covers all the costs that are legally bound and any payouts an insured person is responsible for if he/she has been legally liable for it. 

The liability insurance doesn’t cover contractual liabilities and intentional damages done to the other person. It is not likely as other insurance policies, it pays to a third-party. So, it is also called third-party insurance.

Liability insurance is mainly critical or important for those who are liable for sustainable injuries to a person because of his/her fault. It doesn’t cover criminal and intentional acts. 

Anyone who is the owner of a specific business or practices any profession or anyone who can be sued for injuries can take this type of policy. It gives protection to both insured people and the injured third-party because of the negligence done by the insured person.

In most states, it is mandatory to have liability insurance for vehicles under their automotive insurance policy so that if any accident occurs and causes any damages or injury to a third-party it can certainly be covered under the policy.

There is also personal liability insurance, this type of insurance is mostly taken by persons of high net worth or the persons having many assets to protect. But this type of insurance is usually recommended to such people whose income per annum exceeds the joint coverage or protection limits of other personal insurance policies like home insurance.

Case laws

Dominion Of India vs. Kaniz Fatma And Others on 17 April 1961 Equivalent citations: 1961 IILLJ 197 All

The first appeal, in this case, was filed by the Union of India representing railways for a recovery suit of damages of 10,000 rupees from the respondent. The plaintiff’s son was the employee of Indian railways appointed as a fireman in railways, he died by fire caused in the railway out of the collision of two railways. 

He sustained fatal injuries and hospital authorities declared him dead. At the time of death, his age was 21 years and he was drawing an income of Rs. 34-7-0 including some other allowance. Expectations of his life were sixty years, so his father filed a suit for losing his support and the benefits of his son.

As the collision arose out of the negligence of the defendant (railways) employee’s the plaintiff (father of a deceased son) claimed damages of Rs. 10,000. 

The defendant (appellant) placed some grounds as Workmen’s compensation and the doctrine of common employment to set a bar as the plaintiff was not entitled to the benefit.

The Supreme Court overruled the defence and decreed Rs. 4,800 for the plaintiff’s suit. The current appeal has been filed by the plaintiff against the aforesaid decree.

The three points are given down by the counsel for defendant-appellant:

• The suit was not maintainable given the Workmen’s compensation provisions and the remedy which was open for the plaintiff processed under said Act under section 19(2) of the Act.
• Secondly, diseased and servants or employee’s of the appellant being in the same common employment of the appellant, the appellant could not be held liable for negligence or misconduct is done by any co-employee, for this specific reason he placed the doctrine of common employment forward.
• Thirdly, he submitted provisions of the Fatal Accidents Act and contended that the said framed suit is not maintainable and a defective suit in the eyes of law.

The counsel for respondent Sadik Ali submitted that the deceased son was the only heir of them the court shall award the decree which will be proportionate to their shares as for mother and father of diseased, by controverting all three contentions.

He also urged that it was the choice of the plaintiff to choose either Workmen’s compensation or to file a suit in civil court.

Therefore, the court held that the benefits are for the heirs of the diseased person as he has not married he has only two heirs or record as his mother and father, so in the present suit, the decree has divided for different heirs, it is also true that Section 2 of the said provisions puts a bar on further suits. The court said that the gratuitous amount for relief to respondents shall be given by taking this matter to the railway administration. Therefore the appeal was allowed by the court but looking towards the circumstances of the case the court said to parties to handle their costs.

Municipal Mutual Insurance Ltd. v. Hills (H. M. Inspector of Taxes) [1932] 16 TC 430 (HL) 

In this case, the question of whether annual surplus arising out of employers’ liability Insurance or miscellaneous insurance business has to do with fire policyholders who form profits and gains which are subject to the income tax. So as per the facts of the case, it appeared that the main business of the company was that of fire insurance. 

Later, in 1913 a progressively increasing miscellaneous insurance business had been undertaken by the company. In 1918, the company started the business of the employers’ liability insurance which development was of very extensive scale. 

So it stated that they were free from the obligation by the board of Trade from the statutory deposit in respect of the latter business on the ground that it satisfied the board that their business under that head was of mutual insurance of its members. 

So in 1922, the annual net premium from both miscellaneous and employers’ liability business exceeded those of the fire business. Therefore, one-half of the policies issued by the company were held by the fire policyholders on the register of fire policy and ½ and ½ by other persons and nearly one-quarter of the total net premium that received by the company and paid in respect of the fire policies. 

Further, given the facts, it was held that the surplus on employers liability and miscellaneous business with fire policyholders didn’t arise from mutual insurance.

Blackburn Rovers Football and Athletic Club PLC v. Avon Insurance PLC and Ors. [2006] EC 840 (QB) (12 April 2006)

This case has filed for failure to set up causation. The football club failed to show that the injury or disease sustained to one of its players during the training is because of his negligence or by his independent act, which occasioned his permanent total disablement by any other cause. 

Conclusion

Therefore, the concept of the employer’s liability insurance has been in the highlights during the pandemic which has arisen because of coronavirus. Due to lack of work and closure of workplaces employees faced so many problems, so that during this period the policy claims have reached heights. It mainly gives justice to the employees who suffer so much because of any injury sustained at the workplace. An employer must protect his/her employees from any damages, loss and injuries. So it is a great statute looking forward to future accidents or any crucial incidents of the employee during work. An employer has to be more conscious about the rights of his employees and for providing a healthy and just environment for the work and during the work hours. It plays a vital role in the employers liability insurance.

References

• https://www.investopedia.com/terms/e/employees-liability-insurance.asp
• https://www.1800thelaw2.com/resources/workers-comp/employer-liability/
• https://indiankanoon.org/doc/1107240
• https://www.casecheck.co.uk/barker-v-corus-uk-plc-hl-lord-hoffman-lord-scott-of-foscoite-lord-rodger-of-earlsferry-lord-walker-of-gestingthorpe-baroness-hale-of-richmond-3-5-2006-times-may-4-2006.html

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