Employers’ and Public liability insurance coverage for COVID-19: what businesses need to know
With the damages regime for fatal claims being significantly higher north of the border, successful claims on behalf of those who have sadly died of coronavirus could be very costly for Scottish businesses in particular.
The key questions are: can you be sued and are you insured?
Potential personal injury claims
It is expected that there will be personal injury litigation arising out of COVID-19. This is likely to comprise a mixture of individual claims and group litigation.
The most obvious example is claims by employees, and we focus on employee claims for the remainder of this note, but we may also see claims by contractors, members of the public and by friends and family members who have caught COVID-19 by “secondary exposure”.
Grounds for establishing liability
In any claim for personal injury an employee will require to identify the duty which is alleged to have been breached. That will typically be in reference to the common law test of negligence and the failure to take reasonable care.
While no longer imposing civil liability (following David Cameron’s cutting of red tape in 2013), a number of regulations passed under the Health and Safety at Work Act 1974 will likely be considered relevant by a court in determining what amounts to reasonable care, including:
- The Control of Substances Hazardous to Health Regulations 2002
- The Personal Protective Equipment and Work Regulations 2002
- The Management of Health and Safety at Work Regulations 1999
This list is non-exhaustive and there is an ever expanding volume of guidance being issued for specific industries and sectors which could be relied upon during litigation.
With the guidance on best practice evolving over time, the use of face masks being an obvious example, keeping businesses running in a safe and compliant manner is a significant undertaking.
Claims are likely to be based on alleged failures to adequately risk assess, provide suitable PPE and implement safe systems of work.
While test litigation may provide some guidance of general application, it will of course be fact specific as to whether a particular business has complied with its duties which will be measured against the knowledge and guidance which was in place at the time.
Even if negligence is established, an employee will require to prove both that COVID-19 was contracted from the workplace, as opposed to from shopping in the supermarket for example, and was as a result of the alleged negligence.
The standard of evidence will be on the balance of probabilities and whilst it will be impossible to definitively prove the source of contracting COVID-19, the normal tests of causation may be bent by the courts.
This has been done with asbestos litigation where concepts such as “material increase of risk” have been developed over time.
Employers’ liability insurance is mandatory and the majority of businesses will hold public liability cover. Both policies are likely to provide cover for “bodily injury” which will be defined to include “illness” or “disease”. We are not aware of any insurer contending that COVID-19 would not fall within these terms.
The Employers’ Liability (Compulsory Insurance) Regulations 1998 prohibits any restriction on EL cover because an employer has failed to either take reasonable care for his employee or fails to comply with any enactment designed to protect employees.
So far, so positive.
- Not all policies will contain extensions for contractual liabilities (such as indemnities) or for statutory defence costs should there be a prosecution.
- An insurer can in principle seek reimbursement from an insured where, in the insurer’s view, there has been a fundamental breach of a policy obligation or condition by the insured.
- PL policies are not covered by the prohibition in the 1998 Regulations and an insurer might seek to rely on an exclusion such as for deliberate or reckless acts in refusing to provide an indemnity.
- Each policy should be checked carefully for any specific term which might prejudice cover if breached. For example, a policy will usually require that insurers are kept up-to-date regarding any material changes during the policy.
There is therefore a significant overlap between how employers can ensure the wellbeing of their workforce in a COVID-19 world, improve the prospects of defending a personal injury claim, and maintain insurance cover.
There are many practical steps which an employer can take to improve its claims defensibility. Please do get in touch if we can assist with reviewing your return from lockdown plans and your insurance policies to help put you in the best position in the event of any claim.
In our next update we will look at Directors’ and Officers’ Insurance coverage for businesses returning from lockdown.
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