Making employers' liability insurance compulsory does nothing to solve the problem of tracing historical policies, writes Martin Bare


When 24 workers died in a negligently caused factory fire in Glasgow in 1968 and it transpired that the employers were uninsured, Parliament enacted the Employers' Liability (Compulsory Insurance) Act 1969. The Act was brought into force from 1 January 1972 and, as the Act was passed, the minister explained that the government was merely making compulsory that which was already good practice, and that the majority of employers were in fact already insured.



Making employers' liability (EL) insurance compulsory would, according to the government, ensure negligently injured employees would always have a worthwhile financial remedy because insurers would always be there to compensate the negligently injured.



Even as early as the mid-1980s, it became obvious that there was a problem in tracing previous EL insurers, especially if the employer itself had ceased to exist. In a consultation in 1995, a review of the provisions was carried out. There was much support for the idea of a central register of EL policies, including from such unlikely sources as the Association of Insurance and Risk Managers in Industry and Commerce. Nevertheless, following the review, the Employers' Liability (Compulsory Insurance) Regulations 1998 were made, but they merely introduced a requirement for the employers themselves to keep their EL certificate for 40 years. The obligation, however, is not accompanied by any sanction for its breach. There is also a separate requirement to display a copy of the EL certificate at each workplace.



Now, in 2007, the Department for Work & Pensions (DWP) is carrying out a review of the 1998 regulations and proposing to abolish both the statutory requirement to maintain the certificate for 40 years and to display it at each workplace. It costs industry £71 million a year to store and display EL certificates and the idea behind the consultation is to reduce such administrative costs.



It would be difficult to imagine a more inappropriate suggestion. Problems in tracing historical EL policies are now chronic. The Association of British Insurers (ABI) operates its code of practice for tracing EL insurance, a voluntary arrangement where insurers are supposed to search (but not share) historical policy information. This code has averaged about 7,000 searches a year for many years. In other words, 7,000 injured employees will be driven to the last resort of the ABI code to try to find those who insured their employers. To put it another way, the 1969 Act is failing injured people more than 120 times a week. If anything else was so broken that it failed 120 times a week, I think it would probably be mended.



The solution is obvious: take the £71 million a year that it costs business to store and display EL certificates and use it instead to maintain a central and searchable database of EL insurance policies. Such databases exist for the insurance of the 26 million cars on UK roads, for each and every home without a TV licence and for every car with or without a tax disc.



To suggest that it could not, or should not, be done for the 1.2 million UK businesses with employees is at best disingenuous and self-serving for the insurance community, and at worst a positive act of neglect towards future victims. Why have compulsory EL insurance if the insurers' obligations can be avoided by simply remaining untraced?



A central database of employers' liability insurers must be established forthwith.



Martin Bare is president of the Association of Personal Injury Lawyers and a partner at Leeds firm Morrish & Co