Reed Smith Client Alerts

As lockdown measures begin to be relaxed in the UK, the first steps are being taken to get businesses up and running again, and to bring employees back into the workplace. We advise that before you re-open your business, you review all relevant insurance policies in place, in particular any employers’ liability insurance and directors’ & officers’ liability insurance policies. These policies may offer important protection if an employee returns to work, catches COVID-19 as a consequence, and then brings a claim against the business or a director or officer of the company. In this article we review the cover that may be available under these policies, and set out our recommendations for engaging with your insurers. Keeping your insurers informed and seeking their input at an early stage of re-opening may prove critical in the event of any future dispute.

Gradually, across the world, countries are beginning to relax the restrictive lockdown measures implemented as a result of COVID-19. In the UK, following Boris Johnson’s announcement on 10 May 2020, the first steps are being taken in industries such as food production, construction, manufacturing and logistics, to get businesses up and running again. Furthermore, for people who cannot work from home the advice is to go back into work, which will obviously affect a full range of industries, including certain office environments.

However, that does not mean that the risk of COVID-19 has disappeared. Without a vaccine or treatment, the potential for a second outbreak, and the consequential impact on your business, remains a very real concern.

Before your business re-opens, we advise reviewing all relevant insurance policies in place, in order that you understand the potential cover available to you. In particular, with employees being allowed back into the workplace, we recommend reviewing any employers’ liability insurance (a compulsory insurance for most businesses) and directors’ & officers’ liability insurance policies you have in place. You should consider what protection you have if an employee returns to work, catches COVID-19 as a consequence, and subsequently brings a claim against the company or a director or officer of the company. These policies will take on increased importance as, if policy terms permit and where used correctly, they can provide an employer with a level of protection from a COVID-19-related claim.1

As the focus shifts from issues stemming from the COVID-19 closures and cancellations, to how best to get businesses back on their feet, we will issue further articles and guidance to assist you in making the best decisions for your business and your workforce. Stay tuned for further alerts from the Reed Smith Insurance Recovery team.

Employers’ liability insurance

Employers’ liability insurance is put in place to protect a business from claims for compensation made by an employee in the event of a work-related injury or illness. A business is responsible for the health and safety of employees whilst they are at work, and if an employee contracts a disease (such as COVID-19) whilst at work, the business may be held liable.

For most businesses in the UK, employers’ liability insurance in respect of “bodily injury or disease” is a legal requirement under the 1969 Employers’ Liability (Compulsory) Insurance Act and associated regulations. You must have employers’ liability insurance as soon as you become an employer and your policy must cover you for at least £5 million and come from an authorised insurer. You can be fined up to £2,500 for every day you do not have appropriate insurance.

‘Disease’ is not defined within the 1969 Act, but we anticipate it is likely to include the risk of an employee contracting COVID-19. Whilst having this type of insurance cover in place will not prevent instances of COVID-19 in the workplace, in the event that an employee does contract COVID-19 at work and make a claim against the employer, an employers’ liability policy will likely cover the legal and compensation costs arising from the claim.