Hiscox Warns UK Businesses on Increasing Employee Lawsuits

According to figures released today by the UK’s Hiscox, “nearly two thirds of smaller businesses are leaving themselves hugely exposed to legal action from their own employees, despite the number of employment tribunals increasing by 15 per cent last year.”

Hiscox annual “Risk Barometer” found “that 62 per cent are playing a dangerous game by failing to protect themselves against possible employee legal action, even though one third are concerned that they could become a victim of the UK’s growing compensation culture,” said the bulletin.

Europe’s insurance industry in general and the UK’s in particular have been concerned for the past several years that the U.S. proclivity to litigate every possible claim, dubbed the “compensation culture,” will spread.

Hiscox said that according to government figures, “the number of cases brought to employment tribunals increased to almost 133,000 last year, with claims relating to unfair dismissal and equal pay accounting for most cases.”

In addition Hiscox warned that a “poorly-worded dismissal email or sexual harassment charge can leave smaller businesses exposed to expensive and lengthy court cases, which can seriously disrupt the running – and reputation – of their organization.”

Gary Head, Director of Business Insurance for Hiscox UK, pointed out: “Most bosses will have considered what to do if their office burns down, but the fact is they are more likely to be sued by one of their employees. Although smaller businesses tend to have more of a ‘family atmosphere’, employee litigation remains a risk so it’s concerning that employment practices insurance is pretty low down their list of priorities.

“By failing to take out appropriate cover they’re leaving themselves hugely exposed to lengthy and expensive legal action and significant reputational damage.”

Hiscox also found that paradoxically, “more than a third of the small businesses surveyed admitted they would actually reduce their levels of business insurance cover if faced with financial difficulty. With the credit crunch predicted to have an effect on even the smallest of balance sheets, there is a danger that businesses will cut corners and put themselves at risk.”

The Hiscox Risk Barometer also determined “that Directors and Officers’ cover (D&O) – which protects company directors personally for claims brought against them as the manager of their organization – is the least popular type of business cover. Less than one third of those surveyed had D&O cover (31 per cent), despite the fact that any director, officer or manager can be exposed by law to unlimited personal liability.”

Head concluded: “We know that many businesses find insurance complex and confusing, whilst one in five don’t have sufficient time to devote to finding the best insurance for their company. Unfortunately for them, pleading ignorance will not help if they’re summoned to the law court with no insurance in place.”

A complete list of the 15 most popular types of business coverage is available on the Company’s web site at: www.hiscox.com.

Source: Hiscox