Ian Jerrum explains the steps required to resolve a personal injury claim against an employer

A claims handler's first concern when looking at an EL claim will be to assess whether the policy cover has been triggered. Assuming it has, the investigation progesses to determine whether the insured is legally liable to pay compensation to the claimant, and if so, proceed to settlement negotiations.

Like any other liability policy, EL insurance takes the form of a contract of indemnity. The insurer undertakes to restore the insured to the financial position he enjoyed prior to any loss where the policyholder incurs a legal liability to pay compensation to another party.

Legal liability can arise through a breach of statute or contract - or through a civil wrong or 'tort' (most commonly, negligence).

Employers are considered to have a number of 'common law' duties to their employees. These include the selection of suitable and competent employees, the provision of a safe place of work, safe plant and appliances, and a safe system of work. These duties have been encapsulated in various pieces of legislation, most importantly the Health and Safety at Work Act [1974], which imposes specific duties on employers in regard to employee safety and responsibility for staff welfare.

Under the terms of the Employers' Liability (Compulsory Insurance) Act [1969] all UK employers (with a few exceptions) are required to take out cover with an authorised insurer (that is currently authorised to carry out EL insurance business by the FSA) against liability for bodily injury or disease sustained by employees arising out of their employment.

Policy wordings will define exactly who is an employee. They may include: apprentices, hired, lent or borrowed labour (even if unpaid), labour-only subcontractors, work experience personnel and voluntary workers.

In practice, the distinction between an employee and an independent contractor is usually made based on whether or not the employer has control of their method of work.

EL policies will also meet costs and expenses incurred in defending a claim by the policyholder, with the insurer's written consent.

It will also pay for the costs of legal representation at any inquest following death, and at proceedings in a court of summary jurisdiction arising from any alleged breach of statutory duty (for example, a prosecution for a breach of the Health and Safety at Work Act) that led to an employee being injured.

When a claim arises the insurer will need to allocate a reserve to that claim reflecting, as possible at this early stage, the severity of the injury. The amount can be amended later as more information becomes available.

The process of handling liability claims is subject to the Civil Procedure Rules (Woolf reforms) which are covered in a case-study based course accessible to Insurance Times readers online (see below).

Following an injury, both parties can nominate a medical expert to prepare a report. But, to save costs they will normally agree on one who is acceptable to both.

This expert will review the employee's medical history before examining the injured employee and compiling a report substantiating the extent, probable cause and likely future consequences of the injury.

The value of the claim will be assessed based on this report (and any subsequent or additional reports) - also taking account of associated costs detailed in the employee's statement of claim - including medical treatment, damaged property and any additional costs incurred as a result (special damages).

Any pre-settlement benefits received from the DSS have to be refunded, requiring close liaison with the compensation recovery unit.

Other 'heads of claim' include pain, suffering and loss of amenity, and future care costs. These come under the heading of 'general damages'.

Pain, suffering and loss of amenity is generally a direct compensation for trauma suffered, reflecting an injury's ongoing impact on the claimant's day-to-day life. As a guide, insurers can refer to a number of publications, such as the Judicial Studies Board Guide, Kemp & Kemp Personal Injury Practice, and online resources that detail past awards for different injuries.

Future expenditure

If the employee is unable to work again or has to take a less well-paid job, an award for future loss of earnings will be made to reflect this.

This is calculated by reference to the Ogden Tables.

One further item is additional future expenditure, for example - the cost of nursing care, medical expenses, alterations to the claimant's home, appliances and domestic help

The insurer will settle the claim in a single lump sum or - by agreement or court order - through regular payments to provide the claimant with an income for life.

Finally, the insurer has a number of potential defences against the claim.

The simplest, denial, involves demonstrating that there has been no breach of duty or of any relevant health and safety statute and therefore no liability. If the claimant is partly to blame for the accident contributory negligence can be pleaded, and the settlement reduced to reflect this.

The full text of the case-study based module on EL claims referred to above can be accessed by going to www.tick.ukcomand entering your surname as Insurance and password as Times.
Test yourself on EL claims

Q1. Which is the key piece of legislation governing employer's duties in relation to the safety and welfare of their employees?

Q2. Name three areas addressed by rehabilitation supportefforts

Q3. Name two reference sources to which insurers might turn as a guide to past awards for general damages

Q4. What would a claims handler use to assist them in establishing an appropriate 'multiplier' for a future loss of earnings award?

Q5. What must an insurer do to establish grounds for denial of a claim?

Answers to EL quiz

Q1. Health & Safety at Work Act [1974]

Q2. Physical disability, pain management, pyschological rehabilitation

Q3. Judicial Studies Board Guide, Kemp & Kemp

Q4. The Ogden Tables

Q5. They must demonstrate that there has been no breach of duty or any relevant health and safety statute and that no liability therefore arises