In recent years, a number of factors have come together to concentrate the minds of employers' liability underwriters throughout the land. Some of these factors arose because of the basic nature of employers' liability policy wording. Cover is expressed to be on a "cause" basis, i.e. the trigger point for claims at the time that the employee is exposed to the risk. In most cases, this is not a problem, because most claims result from an injury that clearly arises at one time, such as a fall from a ladder. The time can be pinpointed and the insurer which is on risk should accept the claim. But, there are many cases that result in a disease or illness many years after exposure to the risk. This could be workers in mining exposed to silica dust, asbestos workers, or in a job where constant repetitive action is required, or where noise levels are high.

Lost identity
These can result in lung disease, repetitive strain injury and noise-induced hearing loss, among others. The problem is that the disability manifests itself many years later – sometimes up to 20 or 30 years later, when the identify of the employers' liability insurer may be lost. This means that such employees are effectively unprotected by insurance.

At the same time the employer, assuming it is still in business, is also without insurance, even though it probably had it in the first place.

The claims themselves have developed in recent years, due to the Limitation Act 1980, which granted judges, the discretion to extend the statutory limitation periods. The insurance industry is reluctant to adopt a compulsory "pool" for the benefit of employees, such as the agreement under the MIB in motor insurance because this may result in employers cutting down on their insurance responsibilities. This is despite the provisions of the Employers Liability (Compulsory Insurance) Act 1969, as amended by the Employer's Liability (Compulsory Insurance) Regulations (1998).

These regulations highlight the problem of historic claims, one of the provisions being to retain the Employer' Liability certificates for 40 years from the first renewal after January 1, 1999. This should avoid the difficulties experienced by many policyholders in recent years. Two cases have created a further potential problem for both employees and employers. These arose from the EC Acquired Rights Directive, as implemented in the UK by the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). Regulation 5 of TUPE says when a transfer of an undertaking has been completed, then the transferor's rights and duties etc. shall transfer to the transferee, and anything done before completion shall be deemed to have been done by or in relation to the transfer. The directive allows a choice for the employee to exercise rights against either the transferor, or the transferee, or against the transferee alone. The TUPE regulations have opted for the latter, so the transferor drops out of the picture. Indemnities may have been obtained by the transferee but as far as the employee is concerned the only defendant is the transferee. As the Employers' Liability insurance is written on a "cause" basis, it is clear that the subject of outstanding injury claims has not been appreciated.

In the cases referred to, that of Martin v. Lancashire County Council (1999) concerned a employee injured, then involved in a transfer. It was a question of whether regulation 5 of TUPE applied to a personal injury claim. If not there is no problem and the judge in Martin's case said regulation 5 did not apply and liability therefore remained with the transferor.

Safe place of work
But in the case of Bernadone v. Pall Mall Services Group (1999), the judge ruled that the duty of care owed to an employee by an employer in respect of accidents at work could be expressed either as a duty in tort, or as an implied term in the contract of employment – either way, the employer must provide a safe place and system of work. This applies that Regulation 5, which refers to "all…liabilities under, or in connection with…an employment contract" is wide enough to encompass the transferor's common law obligations. This means it does not matter whether the claim is brought in contract or in tort.

At first this seems unfair to the employee, as clearly his claim would fall between two stools. The problem was recognised by the judge in Bernadone, who constructed an analysis of the law, whereby the transferor's insurers remained liable. Several other legal points came under discussion. Ultimately, a simple solution is needed, either by way of a simple statutory amendment to the TUPE regulations or to the 1969 Act, enabling the benefits of the policy to pass to the transferee. There is nothing to stop insurers placing such a clause in their policies.

The object of employer's liability insurance is to protect employees who are exposed to danger at work.

The above problems should not interfere with this simple objective, but there is a danger that they will cause a shift in attitude by the insurance market. The market is already concerned at the deteriorating claims experience and most insurers will not quote for employers liability insurance in isolation. This stems from "historic" claims encouraged by the Limitation Act 1980 and the new breed of claims such as repetitive strain injury , noise induced loss and stress at work.

Insurers have looked at writing the business on a "claims made" basis, to stop long-term liability exposures. One suggestion is to write disease cover on a this basis but retain the 'cause' option for accident claims.