Employer's Liability Insurance for non-exec directors.

[Pell]

Hi,

We are a small gardening business operating as a Community Interest Company. We have 2 executive directors with 50-50 stake in the company who actively run the business and carry out all the labour, and a third, non-executive director who is there just to allow us to be eligible for external grants and funding, but who has no share in the company, is not a person with significant control and will never be remunerated (as there is nothing to remunerate him for - he is not doing any work). There are no other people the business employs.

Under these circumstances, do we need an Employer's Liability Insurance? Any help would be much appreciated!

[atticus]

Your insurance broker can advise. Consider also Directors and Officers Liability Insurance.

[ULA]

A CIC is a particular form of limited company and as such you will need certain insurances.

1. You may need Public Liability Insurance - this provides protection for the company's legal liabilities should a member of the public, or a client etc suffer injury or damage to property as a result of the actions of you, the non-exec director or any volunteers you may have whilst carrying out your business activities.

2. Employer's Liability Insurance - you may not have employees as defined under the Employer's Liability (Compulsory Insurance) Act 1969 linked to below

https://www.legislation.gov.uk/ukpga/1969/57/section/2

However, as part of your gardening business do you utilise the services of volunteers? If so, your duty of care remains the same whether they are being paid or not, as they are deemed to be acting under your instruction. If you do have volunteers then you nay need in fact need to consider having this insurance.

3. Premises and Equipment - if you operate from a fixed premises you may need cover for buildings, contents, fixtures and fittings. Even if you do not have a fixed premises, you may need cover for gardening equipment, business computers etc.

4. Management Liability Insurance - even though you are a CIC, specific risks exist in terms of losses relating to the actions or activities of the management of the company or directors. Directors and Officers insurance cover provides protection against claims of negligence levied against directors or officers (including non-execs) in the performance of their duties. This can be a particularly important area for a CIC should someone challenge how funds were being utilised and whether a director's actions could be considered in the best interests of the company's social enterprise ethos.

Sorry to have widened the scope of your original question and you may have some of these in place already. I would advise speaking with an insurance broker.

[PallasAthena]

You need Employers' Liability Insurance because you say your directors are executive directors, meaning that they carry out work activities for the company where they are not acting as a Director but as an employee.

Analysing the law isn't necessarily the best way to approach this, instead look at the risks your CIC faces. I don't know exactly how your business operates but supposing an executive director is mowing the grass and gets their hand trapped in the machinery and is injured? [Substitute any similar example that makes sense in your business]. The exec director can sue the CIC. But as the CIC likely has nowhere near enough assets to meet a serious injury claim it is in the directors' best interest to ensure there's an EL insurer there to meet the cost of compensation.

Look at the definition of 'employee' in any EL policy you are offered. Typically that definition is wider than the legal definition of 'employee' and would include all directors and also (as mentioned by ULA) volunteers if that is relevant. Get them added to the definition of 'employee' if you have them.

There are plenty of policies around for small businesses like yours which have combined EL and PL policies. Do you sell or supply any actual products? That may need covering too.

[atticus]

Please do your own research but I think you don't have to have Employer's Liability Insurance because your business does not employ anyone outside of the directors who are also owners.

Handle this advice with care!