Legal updates by Sandy Adirondack
A useful update about Insurance Issues during the Coronavirus Pandemic
CORONAVIRUS: Insurance issues
My update 2101 on 31 January explained a recent supreme court decision on business interruption insurance policies and when they might cover losses arising from Covid-19 or premises having to be closed for lockdown. An organisation may be able to claim on such a policy, but only if it explicitly covers losses arising from certain diseases (phrased in a way which would include the coronavirus) or a pandemic, and/or it explicitly covers a situation where a public authority requires all or part of the insured business premises to be closed. This update looks at how the pandemic or lockdown may affect other types of insurance.
Please note: I have no specialist insurance expertise and this update is intended only as very general guidance. If you are concerned about any aspect of insurance – including how it applies to coronavirus or relevant incidents – it is essential to take advice from your insurance broker or the insurance company.
Anyone who takes out insurance – whether it is an individual, a voluntary organisation, a business or anyone else – has a duty of utmost good faith to keep their insurer informed of any change in their risk profile which could affect the insurance. The insurance broker or insurance company should be notified – or at least consulted about whether it needs to be notified – if the pandemic or related government restrictions, or anything else, has led or might lead to changes in the organisation’s work. This includes, for example, where activities or services are being carried out (for example if any work is or may be done from different premises, or from home, or in the homes of clients/service users), or if carrying out different work from what is covered by the insurance, or if the work is the same but being carried out differently.
The organisation has a duty to carry out appropriate risk assessments for these new situations, and to provide appropriate support, supervision and information to enable staff to work safely. These risk assessments should cover not only health and safety, but also any other potential risks, such as breach of data protection or confidentiality, safeguarding, risks arising from premises being unoccupied, and other risks. Risks, control measures, responsibility for implementing those measures and actions taken should be monitored and recorded, and should be reviewed whenever there is a significant incident, the organisation’s or external situation changes, new regulations are issued, or new guidance or advice is issued by the government or other relevant bodies. Should any claim be brought against the organisation, the organisation will need to provide evidence that risks have been regularly assessed, monitored and mitigated.
Insurance policies are not standard and the names of insurance policies are not used consistently, so two identically titled policies may offer significantly different cover. And even within the same type of policy there may be significant differences in levels of cover (in the same way that even a straightforward personal travel policy may have “silver”, “gold” and “platinum” levels), and within each level there may be extensions or exclusions (risks that are or are not covered, such as winter sports or hazardous activities). With any insurance, the exact cover will depend entirely on the policy detail – and in extreme cases the wording may need to be interpreted by the courts, as happened with the supreme court ruling on when losses arising from Covid-19 or lockdown are covered by business interruption insurance.
During the past year insurers may have sought to make mid-term adjustments to policies, and/or may seek to do so when policies are up for renewal – or organisations may need to review and if appropriate revise their policies before renewal. The Pinsent Masons article Coronavirus: Insurance liability as UK returns to work [see Resources, below] looks briefly at these situations.
INSURANCES RELATING TO WORKERS
Employers’ liability insurance
All employers are legally required to have employer’s liability insurance (also called employer’s liability compulsory insurance), to cover employees’ injury (including illness) or death in the course of employment. The employer can be held liable if they can be shown to have been negligent (failed to exercise the required standard of care), or breached health and safety law or another statutory duty to the employee. This could include, for example, the employer’s failure to undertake and act on regular coronavirus risk assessments or to comply with coronavirus-related or general health and safety legislation and government guidance in making workplaces Covid-secure.
Depending on the insurer, volunteers, apprentices, trainees and others who are not legally employees may be covered by either an organisation’s employers’ liability insurance or its public liability insurance. Or, especially where an organisation has employers’ liability insurance intended for ordinary businesses – rather than intended specifically for organisations which use volunteers – volunteers may not be covered by either employers’ or public liability insurance. This is definitely not advisable, because the organisation could find itself uninsured for injury or loss caused to or by a volunteer.
See the Resources section below for an article by Reed Smith solicitors with a good explanation of employers’ liability insurance in relation to coronavirus, and another by Markel Insurance with a straightforward overview of how to reduce the risk of employers’ liability claims. This is also relevant to public liability and other claims.
Employers’ legal costs
Employer’s legal costs (also called legal expenses, employers’ protection or employers’ indemnity) insurance is not the same as employers’ liability insurance, and is not legally required. Typically it covers the employer’s legal costs for claims of unfair or wrongful dismissal, breach of the contract of employment or unlawful discrimination, and generally also covers employment tribunal awards.
Personnel Today listed in December 2020 the top 10 Covid-related claims employers could face in 2021 [see Resources, below, for details]. You have been warned.
- Furlough: breach of contract when cutting furloughed employees’ pay.
- Furlough: selection decision-making.
- Redundancy: selection process and informing and consulting.
- Health and safety: duties towards pregnant workers.
- Health and safety: refusal to attend dangerous workplace.
- Whistleblowing: raising concerns about employer’s conduct.
- Flexible working requests: when are employers’ decisions discriminatory?
- Handling discipline, capability and grievance procedures.
- Disability discrimination: reasonable adjustments for disabled workers.
- Disability discrimination: when will long covid count as a disability?
Income protection, health care, sickness, accident and death
An organisation may choose to provide, as a benefit for employees or volunteers, health care insurance, permanent health/income protection insurance, critical illness insurance for defined diseases, sickness insurance, personal accident insurance, and/or group live assurance/death in service cover. Whether these cover illness or death caused or exacerbated by Covid-19 will depend entirely on the policy wording.
Coronavirus: Employment insurance policies from Freeths solicitors explains group life assurance/death in service cover, income protection, and critical illness cover in relation to Covid-19 [see Resources, below]. This is from 2 April last year and I haven’t seen an updated version, but is a good starting point if your organisation provides these benefits.
Key worker insurance provides payment to the organisation to help cover the cost of replacing staff if a key dies or is unable to work. Again, cover for Covid-19 absence or death will depend on the policy wording.
Many of us are only too aware of the hassles involved in claiming from airlines or accommodation, or claiming on our travel insurance, when travel plans have been disrupted by illness and/or government restrictions. Even in normal times, it depends on the wording – and it’s even more difficult in Covid times.
Working from home
Anyone working from home, especially if it involves anything more than desk work, may also need to notify their home insurer, landlord and/or mortgage provider. Homeworkers may also need to be clear about whether their own contents insurance, or the employer’s, covers computers and other equipment or materials provided by the employer.
INSURANCE RELATING TO CLAIMS BY THIRD PARTIES
Public liability insurance
Public liability, personal injury or third party insurance protects the organisation from claims by members of the public, including service users and others who use the organisation, for death, illness, injury or loss of or damage to property arising from the negligence of the organisation or someone working for it. Quite apart from the pandemic, it is always important for an organisation to have public liability insurance in relation to its premises, its activities and services. In relation to pandemic-related illness or loss, it is essential for the organisation to inform the insurer about changes in the work being carried out, and where and how it is being done. The organisation must also be able to show, if necessary, that it undertook and complied with Covid-19 risk assessments, and complied with relevant legislation and guidance.
Professional indemnity insurance
Professional indemnity (also called professional liability, errors and omissions or malpractice) insurance is similar to public liability insurance, but covers claims arising from loss or injury caused by professional services provided negligently or without reasonable care. This includes, for example, medical and healthcare services, advice services, architecture and other professional services.
Breach of data protection, privacy or confidentiality
Insurance covering inadvertent breach of confidentiality and/or breach of Data Protection Act duties covers situations where a worker, service user or other person can show they have been damaged because the organisation or someone working for it disclosed information which should not have been disclosed. Especially where staff are working from home or are using their own devices for work purposes, the organisation will have to show that it had proper procedures security procedures in place, and that employees, volunteers and others were complying with them.
Breach of contract
If an organisation is obliged to provide goods or services under contract and is unable to do so, it may be liable to the other party for any loss suffered by that party as a result. An organisation cannot insure against its own deliberate default on a contract, but it can take out consequential loss insurance to cover situations where a contract cannot be performed because of some act beyond its control, such as flood or fire. Alternatively or in addition, a contract may include a force majeure clause saying neither party will be liable if it cannot provide the service because of specified, extraordinary circumstances beyond its control. Such a clause may, or may not, cover pandemics. Many businesses have sought to invoke force majeure clauses in relation to both Brexit and Covid-19. Any organisation unable to comply with a contract should take legal advice, and if it has consequential loss insurance or any other insurance that might provide cover, should contact the insurance broker or provider.
Directors’ & officers’ insurance/Trustee indemnity insurance
Directors’ & officers’ or trustee indemnity insurance provides protection from personal financial liability for members of an organisation’s governing body, arising from decisions and actions taken in that role. Trustee indemnity insurance is similar to D&O but is intended specifically for charities, regardless of whether they are registered with the Charity Commission for England and Wales, OSCR in Scotland or CCNI in Northern Ireland. The article by Reed Smith solicitors [see Resources, below] has a good explanation of D&O insurance in relation to coronavirus.
INSURANCE RELATING TO ASSETS
This includes buildings insurance, contents insurance, insurance against loss or theft of money, and insurance against loss of documents or information.
For buildings, a key insurance issue is whether the premises are being left unoccupied for extended periods, and/or if access to the premises is restricted or not possible.
Where staff are using the organisation’s equipment at home or at other premises which are not the employer’s – because of the pandemic, or for any other reason – it needs to be absolutely clear whether this is insured under the organisation’s contents insurance or the employee’s.
An organisation which has its own vehicles should notify the insurer if the purposes for which they are being used has changed.
If an employee or volunteer who does not usually use their vehicle for work purposes is now doing so because they are working from home or do not feel safe using public transport, they will almost certainly need to inform their insurer. Most insurance for private vehicles covers social, domestic and pleasure use, but not business use. Business use means using the vehicle for the purpose of any employment, for example delivering the organisation’s goods, or transporting clients. Even using it only for commuting to and from work may need to be notified to the insurer. An organisation which fails to warn staff about the need to check their motor insurance for business use could be found to be negligent if a vehicle being used for the organisation’s work is involved in an accident and turns out to be uninsured for this purpose.
VICARIOUS LIABILITY OF EMPLOYERS
Employers can be held liable not only for their own acts, but also through vicarious liability for the acts of their employees which cause injury or loss to other employees or to anyone else. Employers can also have vicarious liability for acts of volunteers and others who are not employees, but have a relationship with the employer which is “akin to employment”. An article by Clyde & Co solicitors [see Resources, below] gives the following examples of coronavirus-related acts of employees for which an their employer could be held liable:
- Employees who are symptomatic, or aware they are infected, who continue to go to work in direct contravention of government guidelines and who, while carrying out their job, consequently infect colleagues, customers, suppliers or contractors [or service users, or others in contact with the organisation].
- Employees negligently undertaking work they are not trained to do, or operating machinery or plant they are not qualified to, due to staff shortages caused by social distancing of self-quarantine measures, and causing injury or loss.
- Employees who cause loss or damage as a result of being overworked or fatigued due to staff shortages caused by social distancing or self-quarantine measures.
- Employees undertaking work from home who cause loss or damage due to distractions not usually present in the workplace, for example due to consuming alcohol or drugs.
- Employees undertaking work from home who cause loss or damage by failing to lock their computer, and a member of their household accesses, uses or sends information inappropriately.
- Volunteers who are undertaking unpaid for with the NHS or charities, and who are deemed to be akin to employees, committing acts which unlawfully cause harm.
WHERE COVID-19 COVER WAS NOT AVAILABLE
In autumn 2020, in an attempt to ease the pressure on NHS hospitals, the Department of Health & Social Care and Care Quality Commission set up a scheme with the Care Quality Commission, to identify care homes and other settings that would be safe for Covid-19 patients who no longer required medical treatment in hospital, but were still recuperating. The initial hope was that 500 care homes and other premises would become designated settings, but as of mid-January, there were only 131. The shortfall was due in part to organisations being unable to obtain the necessary insurance cover.
Following a public campaign by commercial and charity care homes and by umbrella bodies for care providers, the government announced on 20 January it would set up a scheme to provide the necessary insurance cover for designated settings. The scheme covers clinical negligence, employer’s and public liability insurance where a care provider seeking to become a designated setting is unable to secure sufficient commercial insurance, or where an existing provider has been operating without sufficient cover. The scheme will run until the end of March, with a review in mid-February.
I want to provide all of the following articles and other resources, but nearly all spam filters will block an email with so many links. I am therefore giving the full links only for the first three items, and for the others I am separating https:// from the tinyurl.com part of the link. To access those items, either make a single link by deleting the space between the two parts of the link, or copy the tinyurl part of the link and paste it into your browser. Sorry for any inconvenience, but hope you find the resources useful. And yes, I know I should have started using Mailchimp or something similar long ago so I could include lots of links, but have never had the time or money to put it in place…
Covid-19 insurance in general
- Association of British Insurers Covid-19 information hub. How coronavirus affects a wide range of personal and business insurances.
- How does business insurance help during Covid-19? Very helpful short FAQs from Towergate Insurance.
- Making your workplace Covid-secure during the coronavirus pandemic. Not about insurance, but the essential starting point for protecting the organisation.Health & Safety Executive.
Covid-19 and specific insurances
- Coronavirus: Insurance liability as UK returns to work. Employers’ liability insurance; property and business interruption insurance.Pinsent Masons solicitors, 12 May 2020.
- Covid-19: How to reduce the risk of employers’ liability claims. Also applicable to reducing the risk of public liability claims. Markel Insurance, 14 July 2020.
- Novel coronavirus (Covid-19) – Re-opening after lockdown: employer’s liability insurance and directors’ & officers’ liability insurance in the UK. Reed Smith solicitors, 21 May 2020.
- Top 10 Covid-related claims employers could face in 2021. Personnel Today, 4 December 2020.
- Coronavirus: Employment insurance policies. Group life assurance/death in service cover; income protection; critical illness cover. Freeths solicitors, 2 April 2020.
- Covid 19 Healthcare: Vicarious liability in employer liability claims. Clyde & Co solicitors, 30 April 2020.
- Care leaders welcome designated settings indemnity scheme. Care Home Professional, 20 January 2021.
Insurance for charities and other voluntary organisations
- Charities and insurance. CC49, Charity Commission, 1 May 2012.
- 10 questions to help you decide what insurance is right for your organisation. Basic info for those new to or confused about insurance for their organisation. On Zurich Insurance’s FAQs for not-for-profit organisations webpage.
Stay safe, stay well and check your organisation’s insurances!
Sandy Adirondack[Governance and legal information for voluntary organisations]
Flat 39 Gabriel House, 10 Odessa Street, London SE16 7HQ
tel 07973 116264, 020 7232 0726
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This information in this email is for general information only. It is not a complete statement of the law and is in no way intended as a substitute for proper legal advice. It is intended only for charities and other voluntary/community organisations. For commercial bodies or public authorities, some aspects of law may apply differently, there may be additional legal requirements, or the law may not apply at all (for example, charity law does not apply to organisations which are not legally charities, except in a very few situations such as public collections).