Employers Liability Insurance – Do you need to extend yours?

If you outsource work, you may need to review the terms of your employer and public liability insurance. Make sure you are covered for employees and contractors.

It has long been settled law that an employer is responsible for the actions of its employees pursuing the employer’s business. For instance, a delivery driver driving his employer’s van who has an accident while performing his duties, if he was at fault, will lead to his employer being sued for his (the driver’s) negligence. Similarly, a doctor who negligently performs an operation will find that the claim will be directed against the NHS. However, a problem arises where an employee while on duty does an act which is outside the scope of his or her employment duties.

Two recent Supreme Court decisions have extended the reach of the doctrine of vicarious liability, including to cover non-employees.

Cox v Ministry of Justice

In the first case, of Cox v Ministry of Justice, a prison guard who was supervising both civilian staff and prisoners working in the prison kitchen was injured when a prisoner negligently dropped a sack of rice onto her back. The issue was whether the prison should be liable for the acts of a prisoner who was not, obviously, an employee. At the first hearing at County Court level, the claim by the prison guard was dismissed, but both the Court of Appeal and the Supreme Court reversed that decision, finding that the relationship between the prisoner and the Prison Service was similar to that of employer and employee.

In this instance the prisoner was carrying on activities which were part of the operation of the prison and the prison obviously received a benefit from the labour provided by the prisoner. The prison had assigned responsibility for that task to the particular prisoner whose negligence led to the injury and the prison (in this case the Ministry of Justice) was liable for creating that risk. This case is important because it extends the doctrine of vicarious liability to cover people who are not necessarily employees of the business sued. In some workplaces there will be outsourced workers carrying on tasks for the business and this case might have implications there.

Mohamud v William Morrison Supermarkets plc,

In the second case, of Mohamud v William Morrison Supermarkets plc, a much more extreme case, Morrisons were held liable for the actions of their employee who racially abused and assaulted a customer who visited one of their petrol stations. At the first instance and then at the Court of Appeal, the claimant’s claim was dismissed on the basis that there was not a sufficiently close connection between the wrongdoing of the employee and the duties of his employment. In other words, it was argued in those lower courts that the act of the employee in racially abusing and assaulting the customer, as well as telling him to leave the premises and not to return, was so outside the scope of what he was employed to do as to mean that Morrisons should not be held liable for his actions. This is known as the “close connection test” which the Supreme Court looked at in some detail and held still to be good law. The Supreme Court carefully considered what happened and noted that the employee was employed to deal with customers. He had been approached by a potential customer and had abused his position in dealing with him. Therefore, on that basis Morrisons were held to be liable for his actions.

Ensure you are covered

The circumstances in both these cases are fairly unusual and any case would always have to be looked at on its own facts. However in the first instance, where an employer retains outsourced staff to perform functions for it, it will need to look very closely at the terms of the contractual arrangement between it and the outsourced provider. There will need to be careful indemnities and warranties as well as insurance provisions in place. In the second case, whilst the facts were fairly extraordinary (which suggests the situation will only rarely arise), it will be necessary for employers to have diversity policies and anti-discrimination policies in place (and to enforce them) and to ensure that staff are trained on them. However, this case does considerably extend the law.

It would be advisable for all employers to check the term of their public and employers liability insurance to see what cover is provided and to extend it if necessary.

If you need further advice or assistance on these issues please contact us.