Tracing employers’ liability insurers

The need to trace the employers’ liability insurer of a company arises when a personal injury claim is to be made based on employment many years ago. Cases involving asbestos exposure and industrial deafness are the classic example.

If the employer company no longer exists, then the usual route is to track down their insurance company at the time. A Court will usually agree to restore the company to the “record” as the process is called, and the insurer will pay any compensation found to be due. No problem you might say, but what if you cannot find the insurance company.

For years there has been a campaign to set up a register to show which company was insured by which insurance company, and for what period. We have that system in place for motor vehicles. In law, a company must have employers’ liability insurance in place, so why not have a central record? Companies House keep details of registered office, shareholders, annual return and so on, so why not have an extra box to provide insurance details.

It seems very simple, so why are the insurance companies dragging their feet?

Whenever the insurance industry feels under pressure it sets up a voluntary scheme. You can see many examples of this avoidance mechanism across business regulation – we will do it ourselves, so no need to make it law.  The Employers’ Liability Tracing Service was set up as the voluntary answer. The fact is that the service cannot find answers to every enquiry, and you know why, because one complete list does not exist.

Insurance companies like to close their book when the risk they insured is ended.

Let me tell you what this means. An insurance company accepts certain financial risks in return for a premium. The solvency of an insurance company depends on it having sufficient funds to cover the known risks. The sooner it can draw a line under a particular policy the better, as it can then declare a profit or loss on that particular piece of business, and move on.

What really frightens insurance companies are compensation cases claiming for harm caused many years ago, and asbestos compensation cases are the best example. An employer who negligently allowed exposure to asbestos 30 years ago will today be found liable to pay compensation, and yes the companies’ insurer will have to pay.

You might remember the Lloyds insurance market problems of many years ago. The main cause was asbestos. “Names” as investors in the insurance market were called, which meant they had to return large sums to their insurance syndicates, to cover these historical liabilities.

Insurers argued long and hard that risks which were not known about at the time they wrote the policies should not be covered. They have lost that argument, and they have lost a series of cases in which they argued that compensation cases had been brought too late. So the insurers are on the hook if they can be traced.

There is one exception which is still being argued in the Courts. An appeal is outstanding based on the wording of some policies (case now decided). Some insurers argue they are only liable to pay if someone falls ill while they are the insurer, whereas the law to date has been that an insurer must pay if the asbestos exposure took place when they were the employers’ liability insurer. The Independent wrote on this subject on 3 October 2010, telling us about an appeal case. The case seems to be causing some embarassment to insurers, and the Association of British Insurers is blaming a small group of insurers for the appeal. It identifies insurers in “run-off.” Run-off means the insurer, often an insurance syndicate, has stopped writing business and is trying to close its book. Cases arising 30 years and more after an insurance policy was in place are an obvious difficulty for insurers.

Not being traced could be seen as an advantage for an insurer with a historical liability. Surely an insurance company would not want to hide away from its liabilities?

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