New risks surrounding employer's liability cover could be a double blow for councils, warned Alarm, the national forum for risk management in the public sector.
It said that with at least four companies underwriting large amounts of EL cover being investigated over suspected invalid policies, local councils were being warned that they could face multiple difficulties.
Alarm said hundreds of local councils could be at risk of prosecution for buying cover from unauthorised insurers as well as paying out claims without proper cover.
It warned local organisations to investigate the authorisation of insurers before taking out cover.
Alarm chairman Bob Cope said: "Councils and other public sector bodies must look at the authorization of their insurance policies as a matter of course, or face the huge consequences of being found to have used bogus cover.
"The increased cost of employer's liability insurance means that employers are naturally shopping around for alternative insurers, but they must ensure that those they chose have valid and genuine policies.
"A double blow such as this could cost thousands of pounds, money which local councils must not waste on risks which could have been avoided in the first place with proper risk management."
