Recruitment Agencies require all the insurance that any other business or office may require. But they also need specialist insurance cover to protect them against the particular risks and insurance claims faced by the recruitment industry. We’re going to run through these specialist areas of cover, including Employer’s Liability, Public Liability, Professional Indemnity and Vicarious Liability, and a few insurance claims examples, to illustrate why you might need them.
This cover is a legal requirement and all organisations that have employees (with only a few exceptions) must have this insurance in place. This will cover claims made against you for any injury or loss suffered by an employee due to your negligence. If you supply temporary workers, then you should ensure that your policy specifically includes cover for the temporary workers supplied as most standard commercial policies will not do so.
As an employer, you have a duty of care to your temporary workers. For instance, you should ensure that your client is aware of any special requirements that they have (e.g. a medical condition), and where appropriate, you should supply such workers with suitable personal protective equipment. Should you fail in your responsibilities, then you may become liable.
Employers’ Liability claim example
A recruitment agency supplying temporary workers to a warehouse is required to provide them with steel toe capped boots. A worker is supplied but boots have been supplied without steel toecaps as a result of an ordering error. The temporary worker drops a load on their foot and suffers a broken toe. The recruitment agency is legally liable for failing to supply the appropriate footwear. The right policy will protect you in this situation.
This will cover claims made against you for any injury, loss or damage to a third party due to your negligence. As a recruitment agency, the chances of harm to a third party are fairly small. However, this may change if you are asked to agree to your client’s contract terms (rather than supplying under your own Terms of Business) as they may contain clauses which make you responsible for the acts of your temporary workers. It may be best to avoid such contracts but if you wish to take one on, your insurer should be able to help. The relevant cover is usually provided by your Public Liability insurance including a “contractual liability” extension which means it accepts liability which you have agreed under a contract.
Public Liability claim example
A recruitment agency supplies a temporary worker to a construction company. The construction company requires that the recruitment agency agrees to their contract terms, which include a clause that makes the recruitment agency responsible for the actions of the temporary worker supplied. The temporary worker leaves his tools in an unsafe place and a fellow worker suffers an injury and claims (and receives) an award. The construction company will look to recover all costs and expenses from the recruitment agency. Appropriate insurance would cover the recruitment agency.
As an organisation that provides a professional service to third parties (both candidates and clients) you’re required to do so with reasonable skill and care. If you make a genuine mistake along the way and a third party suffers a loss, they may well try to make a claim against you; in this situation your Professional Indemnity insurance should protect you. Professional Indemnity insurance protects your organisation from claims arising from negligent acts, errors or omissions whilst you are conducting business as a recruitment agency.
Professional Indemnity claim example
A recruitment agency takes on a client and, in the process of trying to find them a new job, accidentally forwards their CV to their current employer. As a result, the candidate may find their position compromised and may have to resign, or they may have lost all prospects of promotion. As this was the fault of the recruitment agency, the candidate may make a claim against them for their loss (e.g. lost salary).
To be vicariously liable is to be responsible for the actions of persons under your control. In most circumstances, you will only be vicariously liable for your own staff (i.e. your recruitment executives and admin staff) and not for any temporary workers you place, they normally being under the control of your client. However, this may change if you are asked to agree to your client’s contract terms (rather than supplying under your own Terms of Business) as these may contain clauses making you responsible for the acts of the temporary workers you have placed. If this situation arises, you need to ensure your Professional Indemnity specifically includes vicarious liability cover.
Vicarious Liability claim example
A recruitment agency supplies an IT contractor temp on your client’s contract terms which include a clause stating that the recruitment agency is liable for the actions of the temporary worker supplied. The temp is hired to programme a new computer system; however, they make a mistake and cause issues on the current system. The hirer has to bring in alternative programmers to rectify the damage and this causes them a financial loss through additional programming costs, recovery expenses, loss of business and etc. The hirer then makes a claim against the recruitment agency for the loss and under the terms of the contract, the agency is liable. Properly insured, it would be protected.
In short, the recruitment industry faces complex issues but the insurance industry has kept pace and specialist cover is available. Just seek out the specialists and make sure you have the right cover in place. Read about our specialist recruitment insurance and contact us to get a quote today.