INSURANCE AGAINST LIABILITY FOR EMPLOYEES (Hansard, 11 July 1969)

§ Mr. David Watkins (Consett)
I beg to move Amendment No. 1, in page 1, line 12, at end insert: (2) Regulations may provide that the amount for which an employer is required by this Act to insure and maintain insurance shall, either generally or in such cases or classes of case as may be prescribed by the regulations, be limited in such manner as may be so prescribed. The purpose of the Amendment is to enable the regulations to prescribe a limitation on the amount of insurance cover to be provided if it turns out that discussions with the interests concerned show this to be desirable. There was a previous mention of limitation by the Under-Secretary of State in the Standing Committee on the Bill. He said on that occasion that insurers might not be prepared to accept unlimited liability in all cases, and it might be necessary to lay down a maximum liability for each employee.
1782 Since the conclusion of the Committee stage there have been discussions between representatives of the insurance market and myself, and there have also been extensive discussions between insurers and the Department and, I may say, between the Department and myself. These discussions have shown that insurers do feel some disquiet about accepting an unlimited liability. Although, hitherto, they have commonly accepted unlimited liability in this field they have taken cognizance of the fact that there is increasing difficulty in the reinsurance of risks, and they have also pointed out a precedent in other, recent legislation, which has set down a maximum liability.
A particular precedent is established in the Nuclear Installations Act, 1965. It lays down the limitation of £5 million per occurrence. I would point out that this Amendment does not make it mandatory that there should be a limit, but it would allow one to be applied by regulation should this prove to be desirable, and, of course, prove to be desirable consequent on discussions with all interested persons and representatives of all interested bodies. It is quite clear that the sort of limit which insurers are thinking about would be a large one.
The matters I have referred to would be determined in regulations, and the parties to the discussions to which I have referred, so far are talking of a limit of about £1 million for each occurrence. The highest bid for damages arising out of one occurrence which I have been able to trade was about £200,000.
This is a desirable Amendment. It follows on very close consultations with very considerable authorities. It would make the Bill much more workable in practice. My fellow sponsors and I have had the assistance of the Department and of the parliamentary draftsmen in preparing the Amendment.

§ Mr. David Mitchell (Basingstoke)
There are a few points I want to make. The Amendment is not particularly controversial, but I think that we ought to hear a little more about the circumstances in which an employee's claim against the employer would not be covered by this policy.
The hon. Member for Consett (Mr. David Watkins), who introduced the Bill and took it through Committee, has been 1783 very helpful in meeting the comments which have been made about it. He mentioned the nuclear explosion. I realise, of course, that this is a totally exceptional circumstance which is out of all relation to normal business and commercial life, but are there any other circumstances less than that? We ought to know.
The second point is that since the Minister is taking some responsibility for the Bill we ought to have an assurance from him that the purposes of the Bill will not be, so to say, defeated by passing this Amendment and that the Government, for their part, are satisfied that the effect of the Amendment will be perfectly satisfactory.
Thirdly, this underlines the importance which has to be attached to the drafting of the regulations when they are made, for it underlines the fact that those regulations will be of a considerably complex nature.

§ Mr. David Watkins
By permission of the House, I would briefly reply to the points made by the hon. Member for Basingstoke (Mr. David Mitchell). He raised the issue of the circumstances of a claim being covered. The answer to that is that it would be covered completely up to the maximum of £1 million. That is a very high figure. I do not think that there should be any difficulty in that respect.
As to the matter of the Nuclear Installations Act to which I referred, that, of course, is something which is quite separate from this Bill. That matter is covered by a separate Act of Parliament. I am very conscious of the hon. Member's concern, and I know the concern of all Members of the House, about the powers for regulations, but I can assure them that there is every intention—and I am glad to add my support in putting it into the official record of the House—that the regulations would only be made following the most detailed discussions. The hon. Member will remember we discussed this at some length in Committee.

§ Mr. David Mitchell
Is the hon. Gentleman able to commit the Government in the way he is now doing? Perhaps he should clarify that situation for us.

§ The Under-Secretary of State for the Department of Health and Social Security (Mr. Norman Pentland)
My hon. Friend 1784 cannot commit the Government, but the Government have assisted him in putting the Bill into shape. I do not want to develop what my hon. Friend has said, but we accept his arguments and I therefore recommend the Amendment to the House.

§ Mr. R. W. Brown (Shoreditch and Finsbury)
Although I am fully in agreement with the Amendment, I am a little worried about what happens if an insurance company produces a facile argument and says that it will not pay. Will there be sufficienet power to ensure, when the employer has complied with this requirement, that the insurance company will also comply?

§ Mr. David Watkins
I have had three interventions in succession—

§ Mr. Deputy Speaker (Mr. Harry Gourlay)
Perhaps I should clarify the position. As the mover of the Amendment, the hon. Gentleman has the right to speak more than once.

§ Mr. Watkins
My hon. Friend the Member for Shoreditch and Finsbury (Mr. R. W. Brown) is anticipating later Clauses of the Bill. I cannot commit the Government, but what I have said is largely what has been said by my hon. Friend the Under-Secretary of State in representing the position of the Government at earlier stages of the Bill. The situation referred to by my hon. Friend the Member for Shoreditch and Finsbury is unlikely to arise because the limit is £1 million.
I hope that my hon. Friend will accept this and that the House will accept the Amendment.

§ Mr. David Mitchell
I beg to move Amendment No. 17, in page 1, line 14, leave out paragraph (a) and insert: (a) ' approved policy ' means a policy of insurance which, as respects the liability which is required to be insured under this Act, is not subject to any conditions or exceptions which have been prohibited by regulations: Provided that nothing in the regulations shall prevent an insurer who has paid any sum in or towards the discharge of that liability by virtue only of such regulations from recovering that sum from the person on whose behalf that sum was paid.

§ Mr. Deputy Speaker
With this Amendment the House can discuss also Amendment No. 2, in page 1, line 15, leave out 'except such as may be permitted ' and insert ' prohibited for those purposes'.

§ Mr. Mitchell
The first part of Amendment No. 17 covers the same ground as Amendment No. 2, in the name of the sponsor of the Bill. It deals with the point made by the hon. Member for Shoreditch and Finsbury (Mr. R. W. Brown) and I imagine that on both sides of the House there will be acceptance of the first part of the Amendment.
The second part of Amendment No. 17 represents a difference of view from Amendment No. 2 and it is that part to which I wish to direct the attention of the House. It ensures that an insurer may recover from an employer who has breached the terms of the policy. The situation might arise in which a claim may be made, for example, by an employee in an engineering works who had damaged his hand or was injured by a piece of machinery.
In defiance of the terms of the policy, the employer might have failed properly to service the machinery, have failed to instruct the employees to use the safety devices or have connived at safety devices not being used. The terms of the policy might, therefore, be breached by the employer and, unless the Amendment is made, I am advised that the insurer would be unable to recover from the employer because of his failure to carry out the terms of the policy.
An employer might short-sightedly have broken safety regulations and, as a result, a man may be injured. The Insurance company may pay out but, unless the Amendment is made, the insurance company will have no claim on the employer for failing to comply with the terms of the policy.
The terms of the Amendment closely follow Section 206(1) of the Road Traffic Act, 1960, which is concerned with the possibility of an insurer wishing to sue a driver. That Section reads as follows: … and any sum paid by an insurer or the giver of a security in or towards the discharge of any liability of any person which is covered by the policy or security by virtue only of this subsection shall be recoverable by the insurer or giver of the security from that person. 1786 The amendment follows that terminology, and I commend it to the House.

§ Mr. R. W. Brown
The hon. Member for Basingstoke (Mr. David Mitchell) has mentioned the point I had in mind. If I may quote an example of what actually happened, an employer in Glasgow was insured with an insurance company which accepted the premium for two years running. The employees in that firm were, therefore, happy in the knowledge that they were fully covered through the employers. It happened that there was a tragic accident in which 19 members of my union were killed. After a judicial inquiry and the prosecution of the employer for being in breach of the Factories Act, for which he was fined £500, the insurance company have reneged upon its responsibility and will not pay.

§ Mr. David Mitchell
The purpose of the Amendment is not to help the insurance company to renege on the policy, but to enable it to get the outpayments back from the employer who has breached the terms of the policy.

§ Mr. Brown
Yes, I take that point, but I am concerned that things shall not be made easier for insurance companies such as the General Accident Fire and Life Assurance Corporation. I would never insure with that Corporation, because it is not a responsible body. I therefore hope that the words in the Bill will ensure that when an insurance company is called upon to respond to the liability, it cannot do what the General Accident Fire and Life Assurance Corporation has done. It has behaved deplorably. Instead of accepting responsibility, it is trying to cheat people out of money to which they are entitled.

§ Mr. David Watkins
May I now move Amendment No. 2, which is grouped with this Amendment?

§ Mr. Deputy Speaker
Not at this stage. We are discussing both Amendments together, and what happens to Amendment No. 2 will depend upon what happens to Amendment No. 17. The hon. Gentleman can discuss Amendment 2 without moving it.

§ Mr. Watkins
Thank you for your guidance, Mr. Deputy Speaker. I will 1787 speak to Amendment No. 17 and, in doing so, make reference to Amendment No. 2.
The sense of the two Amendments is similar, in that the hon. Member for Basingstoke (Mr. David Mitchell) and I have identical points in mind, although our approach is in a different form of words. What is at stake is the ability of an insurance company to recover from an employer who has not carried out the necessary safety regulations laid down as part and parcel of a policy.
I feel that Amendment No. 17 is not the best way in which to deal with this matter. It could well be done by regulation. I am sorry to harp once again on regulations, but we had a great deal of discussion in Committee about the difficulty of defining certain matters in the Bill. It could be made clear in regulations that there was no conflict between insurance requirements of the Bill and the interests of insurers in being able to recover sums which they have paid out to employers who have not observed the conditions of a policy.
The primary object of the Bill is to protect people who are injured at work and to ensure that they do not lose damages awarded to them through the normal legal processes of the country. Employees would be covered and would receive their damages.

§ Mr. David Mitchell
There is nothing in Amendment No. 17 to suggest that employees should not be covered. I am merely saying that without the Amendment in the Bill the insurer will be unable to recover from the employer. I am not satisfied that this can be done by regulation.

§ Mr. Watkins
I take the hon. Gentleman's point. I am convinced that this matter could be dealt with by regulation. I am in sympathy with the hon. Gentleman's objective, but I feel that possibly his Amendment would complicate the situation rather than ease it.
The hon. Gentleman referred to the Road Traffic Act, 1960, and cited it as a parallel. One difference between that Act and this Bill is that the Act lays down matters which in the Bill we have decided are best left to regulation. There is no basic difference in objective between 1788 us, but there would appear to be a difference of approach. I feel that the matter can be resolved without our accepting Amendment No. 17, and I hope that the hon. Gentleman will be prepared to agree.

§ Mr. David Mitchell
At this stage, I feel that we ought to have the advice of the Minister on two points. The first is to confirm that he is happy that the matter can be covered by regulation, and the second is so that he may say whether or not he is satisfied with the wording of Amendment No. 17. It would be intolerable if an insurer had to pay out, without the right to recover from an employer who had failed to comply with the terms of a policy. This is a straightforward and simple matter which it is essential should be covered.

§ Mr. R. W. Brown
Surely, where a contract has not been complied with, action could be taken in the normal way through ordinary civil proceedings. If we try to cover every conceivable possibility, we shall tend to ruin the purpose of the Bill.

§ Mr. David Mitchell
Unless the Bill permits such a thing in the form in which it is now drafted, there will not be grounds for any civil action such as were indicated by the hon. Member for Shore-ditch and Finsbury (Mr. R. W. Brown). I am not a lawyer, and I hope that we shall have the benefit of the advice of the Minister, who presumably has consulted legal opinion on the matter.

§ Mr. Pentland
The purpose of Amendment No. 2 is to simplify the administration of the Bill both from the point of view of the Government and the insurer. There is such a wide range of special conditions applicable to individual employers and businesses that it would be an onerous task to have to list them all in regulations. There would always be the risk of some quite acceptable condition being overlooked. As my hon. Friend the Member for Consett (Mr. David Watkins) has said, the proper place for conditions of that kind is in regulations.
The Road Traffic Act has been cited as a parallel, but that Act was different in that the sort of provisions which in this Bill will be dealt with by regulations were written into that Act. The Government feel that Amendment No. 17 should be 1789 resisted and the House should accept Amendment No. 2.

§ Mr. Pentland
I beg to move Amendment No. 3, in page 1 line 18, leave out from ' Britain' to end of line 20 and insert: 'insurance business of any class relevant for the purposes of Part II of the Companies Act 1967 and issuing the policy or policies in the course thereof'. This is a technical Amendment. The effect is to extend the definition of "authorised insurers" so that where the risk to be covered under Clause 1(1)—that is to say, employers' liability—is already covered by the employer in his arrangements for other forms of insurance, such as marine, aircraft, transport or motor insurance, that insurance will comply with the conditions of the Bill.
Hon. Members will understand that in the short time at my disposal before the Bill was taken in Committe, I did not have time for the full consultation that is sometimes necessary to get technical matters of this sort right. Since then my attention has been drawn to the fact that some employers engaged in merchant shipping, and trawler owners, already cover their employers' liability risks as part of their marine insurance which was carried by insurers authorised to carry on marine insurance business. Without this Amendment it would be necessary for these employers to take out fresh insurance cover with employers' liability insurers. This would be an unnecessary disturbance. A similar difficulty could arise in the case of airline operators and possibly in the road haulage field.
This Amendment therefore widens the definition of authorised insurers to take in all insurers lawfully carrying on and issuing policies in the course of insurance business of any class relevant for the purpose of Part II of the Companies Act 1967. The point is, of course, that the supervision of insurers is under the Companies Act 1967 a matter for my right hon. Friend the President of the Board of Trade, and we do not wish to duplicate that machinery, or to interfere 1790 with lawful insurance policies. I recommend the Amendment to the House.

§ Mr. Pentland
I beg to move Amendment No. 4, in page 2, line 1 leave out 'a person' and insert 'an employer'.
This is a minor technical Amendment to ensure that there is no conflict between paragraphs (b) and (d) of subsection (2) of Clause 1. It avoids imposing any requirement that an insurer, who otherwise fulfils all the conditions for approval, shall have a place of business in Great Britain.
There is probably no requirement that, for example, a Lloyds underwriter should have a place of business in Great Britain for him to be legitimately carrying on an insurance business within the meaning of Part II of the Companies Act 1967, and this Amendment will avoid imposing any such requirement. Paragraph (d) has always been intended to exclude from the scope of the Bill employers who have no place of business in Great Britain, except insofar as they are included by regulations.
I recommend that the House accept the Amendment.

§ Mr. David Mitchell
I see no reason why we should not accept what the Minister has said. I would not wish to oppose the Amendment.