There seems to be a lack of understanding in the recruitment sector around vicarious liability and what it actually means in real terms. Most recruitment insurance policies do not include this automatically and that can have a dramatic effect on the client in the unlikely, yet entirely possible event of a claim. This is a brief description of what vicarious liability is and how this might apply to you as our client.
What is vicarious liability?
The principle of vicarious liability applies where one party assumes responsibility for the actions of another. In the context of commercial insurances, vicarious liability is particularly relevant in employer/employee relationships – generally speaking, an employer shall remain responsible for the actions of the employee. In practice, this means that an employer is exposed to legal claims resulting from negligent acts or omission committed by one of their employees, which have led to a third-party loss.
Professional Indemnity and Public Liability insurance will automatically include cover for the actions of employees as standard for most businesses. For example, an accountancy practice may employ numerous qualified accountants, all utilising their own professional expertise – as the accountancy practice is vicariously liable for its employees’ actions, their Professional Indemnity insurance will cover them if a negligent act on an employee’s part leads to legal action.
How does this apply to those in the recruitment sector?
The majority of businesses, and the insurers protecting them, are posed very few challenges by vicarious liability. However, more consideration is required for the recruitment sector.
In short, in the event that actions of a contracted worker lead to a third-party loss, there may be some ambiguity over who is the ‘employer’ for the purposes of establishing legal responsibility. This may involve identifying the party (if any) which directs, supervises, directs or controls the worker (SDC). Generally speaking, our contractual terms dictate the liability, with certain parties accepting responsibility without being directly involved in the delivery of services. In other cases, the worker themselves may be primarily responsible – this is particularly relevant to contractors.
It is crucial that recruitment businesses have a clear understanding of their exposure to vicarious claims, and that their insurance adequately protects them.
How does this relate to you as a client?
Typically, a contractor placed by us will be engaged via a Limited Company of some sort, either the contractors own Personal Service Company or via an Umbrella Company. On this basis, to protect our clients, we will accept vicarious liability contractually and maintain this level of insurance up to the value of £5,000,000 per claim. Without insurance coverage for vicarious liability, you as a client, risk having business assets seized to satisfy legal judgments or settlements. Working with us means that our Tier 1 insurance provider helps protect these assets by providing a source of funds to cover liabilities, reducing the financial risk.
For more information, please do not hesitate to contact us.