The Lost Promise of Compulsory Employers’ Liability Insurance: A Tragedy in Three Acts

Compulsory insurance for workplace injuries has been in place in the United Kingdom for more than five decades. The political pressure to introduce mandatory cover, and to criminalise failures to do so, followed notorious workplace fires. But politicians and academic commentators at the time noted that the legislation introduced did not correct the very issue in those fires: the business that was insured but where the conduct of the employer meant that the insurer had a defence to liability. The compulsion was entirely one-way: employers had to insure, but insurers were not subject to enhanced regulation on the payment of claims. This issue has returned to the forefront in light of recent litigation testing the modern position. The changes to liability insurance law since the 1970s are most clearly shown by three areas of parliamentary action. The rights of third parties claiming under liability insurance policies was altered by the Third Party (Rights Against Insurers) Act 2010 (replacing the 1930 Act of the same name). The remedies available to the insurer for non-compliance with key obligations was reformed by the Insurance Act 2015. Alongside this, the regulation of insurance was significantly enhanced by measures under the Financial Services and Markets Act 2000 (as amended). Each of these measures was the product of detailed consideration, often following extensive Law Commission analysis. Despite this, the issue that showed the weakness of compulsory insurance in the 1970s has re-emerged. None of the changes to substantive insurance contract law or the burgeoning regulatory state protect the injured worker where the conduct of the employer makes them uninsurable. In essence, what has been preserved is the freedom of contract and market choice of insurers, over any sense of regulation in the wider public good. This paper provides a range of regulatory and substantive corrections that would address this issue. In doing so, it builds on measures used elsewhere in English insurance law. The next step in the reform of insurance contract law is to deliver more fully on the promise of compulsory insurance, and that starts in the employment context.