How Quinn fell foul of EL laws

' In March last year, Insurance Times revealed that the Department for Work and Pensions was "looking into" Irish insurer Quinn-direct's employers' liability (EL) policy.
Concerns had been raised by insurers that Quinn's policy did not meet the requirements of the legislation governing the provision of EL insurance, set out in the Employers' Liability (Compulsory Insurance) Act [1969].

While the DWP would say no more than the matter was "in hand and advice was being sought", Quinn responded a week later saying that its policy was legal.

"We are in compliance with all relevant
regulation and legislation and any suggestion to the contrary is completely unfounded," said Quinn's commercial financial controller John O'Driscoll defiantly.

But documents released to Insurance Times under the Freedom of Information Act tell a different story. They show that the DWP's lawyers had advised that Quinn's policy was in fact in breach of the Act, leaving policyholders at risk of trading illegally.

As a result, Quinn was required to change or remove a substantial number of clauses in its policy wording in order to continue trading
in the UK.

The documents show that in June 2004, the DWP wrote to Quinn after its lawyers raised concerns over the legality of the policy wording. Questions were raised over Quinn's use
of an excess and the operation of certain exclusions relating to, for example, asbestos exposure and offshore working.

In a number of instances, the DWP warned that policyholders who had taken out a Quinn-direct policy would have to take out additional EL cover in order to trade legally.
The DWP requested that Quinn explain the meaning of these conditions and explain how the conditions met legal requirements.

In August, Quinn-direct commercial director Trevor Shaw wrote to the DWP responding to its concerns.
He agreed that a number of the contentious clauses would be removed or amended: in total, five clauses were taken out of the
original policy wording, while two were amended.

Shaw, however, stood firm on Quinn's controversial use of an excess provision, arguing that it was consistent with legal requirements and should remain.

"Our practice with regard to the excess is to pay the claimant in full and recover the excess from our insured. Therefore, our policy adequately meets the regulation 2(2) as no requirement exists 'for the insured employer to pay the relevant employee'," he said.

But he accepted that the meaning of the clause was not "obvious" and proposed amending it to: "The company shall recover from the insured the first amount as shown under the 'excess categories' in the schedules to this policy."

He also stood firm on Quinn's exclusion clause for injury to employees working offshore. Shaw said this was a "narrow exclusion which we do not feel is inconsistent with the requirement of the 1969 Act".
Three months later the DWP responded. It was still unhappy with Quinn's exclusion for injuries caused to employees offshore. It was concerned that the exclusion did not meet the requirements of the EL legislation and that businesses would need to be made aware that they would have to buy additional cover.

The department also wanted Quinn to explain how it would notify policyholders
of the "substantial" changes it had made to
its policy wording. It also asked how Quinn was to handle the claims made under the old policy wording.
Nearly four months later, O'Driscoll wrote back to the DWP explaining that Quinn had "not written to policyholders directly to inform them of changes to our EL policy wording".

Instead, he said Quinn had notified brokers and would be posting updated wordings on a dedicated website. O'Driscoll also said that the changes to the wording would be applied retrospectively.
In April, the long-running issue of the legality of Quinn's EL policy finally drew to a close with a letter from the DWP saying that "as a result of the clarification and reassurances you provided, the DWP has no problem with the wording of Quinn's ELCI policy".

Shaw told Insurance Times this week,
"We welcome the matter being resolved a long time ago and since then have traded well in the UK." IT

What was wrong with Quinn's EL policy

Cover for injuries in passenger lifts
Quinn's original policy would only apply in respect of lifts "inspected to the extent required by statutory regulations". The DWP's lawyers advised that this clause did not meet the requirement of employers' liability (EL) regulations.
What Quinn did: removed clause

Excess provision
The policy contained a traditional excess clause. The DWP said the use of such
provision did not meet the requirements of the EL regulations as the employer would be required to meet the first portion of the claim. Quinn argued the clause was acceptable as it would pay the claim and collect the excess from the insured.
The DWP accepted this.
What Quinn did: reworded the clause to make its meaning clear

Offshore working exclusion
The DWP was concerned that employers would not provide sufficient cover for offshore workers. Employers would therefore need to buy an additional policy to trade legally.
Quinn said the wording was "standard for practically all insurers selling employers' liability insurance in the UK" and that it was for brokers to advise clients accordingly.
The DWP accepted this.
What Quinn did: no change to clause

Radioactive contamination exclusion
The DWP said this was "unclear" and could deprive employees of legally required cover.
What Quinn did: removed clause

Asbestos exclusion
The DWP said the exclusion would deprive policyholders of legally required cover.
What Quinn did: removed clause