Do you need employers’ liability insurance?

It’s a question heard time and again at Residential Management Company meetings and is usually met with a resounding “No, we don’t employ anyone”. But do they?

As a managing agent responsible for the placement of insurance on behalf of the management company there are a number of questions you need to ask

Does the management company normally utilise the services of a third party company to carry out all works on the property? Do third parties carry their own public liability insurance and are they checked? Is one person responsible for ensuring they have insurance in place, that it is checked regularly and reported back to the committee at least once a year

If the management company answers yes to all these questions then you might be okay. But could you imagine a perfectly innocent scenario whereby an elderly leaseholder or a casual labourer or a friend of a friend who helps with little snags around the building and is usually paid in cash, falls off a ladder and breaks his leg?

He relied on the income he was getting from these jobs and is now struggling financially. He is also laid up at home and can no longer enjoy the social life he once revelled in with his friends before the accident.

He has a daughter who knows how the law works and persuades him to seek advice from a solicitor. The solicitor agrees to take on the case under a conditional fee agreement, more commonly referred to as “no win no fee”, and submits a claim against the management company for loss of earnings and compensation for his injuries

Would the insurance policy you have arranged respond?

Without employers’ liability insurance, it is very unlikely. If individuals are paid in cash for ad hoc work then they are in all likelihood regarded as employees under the Employers’ Liability (Compulsory Insurance) Act 1969.

Furthermore it is unlikely that the injured party received any formal training or that risk assessments were carried out for any of the work he performed.

In all likelihood, the management company would be held for his injuries with loss of earnings and compensation awarded to him.

This could leave the management company in financial distress; service charges for all the leaseholders might need to be increased to cover for this unexpected cost and of more consequence, the individual committee members of the management company and/or the managing agent could all face claims from the leaseholders seeking recompense for the decision not to purchase employers’ liability insurance in the first place.