Recruitment agencies face a unique set of circumstances when buying insurance. Yes, normal office cover and general liability cover is required for their own staff, but they can often be responsible for the workers they place as well. They need a policy that offers explicit cover for vicarious liability, cover for standard and non-standard contracts, a specifically designed office package and a clear distinction between an agency’s own staff and the candidates they place.
Recruitment, staffing and employment is a growing sector even in the current economic climate and the insurance industry has had to understand that this industry needs specialist coverage.
Below are examples of typical things that could go wrong for recruitment agencies:
Professional Indemnity claims:
Misrepresentation: The most obvious and common type of recruitment claim is where a recruitment agency is accused of not checking a candidate’s references correctly, or misrepresenting a candidate’s experience or qualifications to secure the deal. Frequently, end clients will claim for their re-recruitment costs plus any other expenses incurred. Less frequent are claims received from candidate’s regarding the suitability of the place of work, but claims have been received for sending CVs to current employers, and in one example, a recruitment agency unfortunately sent an email suggesting ‘this guy couldn’t get a job in McDonalds’ to the candidate, who just happened to be a lawyer, instead of their colleague.
Withheld fees: The second most frequent type of PI claim seen in the recruitment sector is hiring clients withholding their fees because of a dispute over performance, or if they deem the recruitment agency guilty of negligence. For recruitment agencies, cash flow is everything and if a large client withholds their fee, this can put the agency’s business in jeopardy. Whilst this is often used by end clients as a leverage tactic, when there are genuine grounds for a negligence claim, you want an insurer who will consider paying the withheld fees if the hiring client agrees in writing not to pursue litigation as this is a much faster resolution to the problem than months of defending a claim, and protects the cash flow.
Vicarious liability: This is a simple concept and means being responsible for the negligence of another party. Since recruitment agencies can be deemed the employer of temporary workers, they can also be deemed responsible for the temporary workers’ negligence, even when they have not been responsible themselves in supplying their recruitment service. Increasingly, recruitment agencies are signing up to hiring clients’ terms of business, and more agencies have contracts of employment with temporary workers than ever before, particularly as a consequence of the agency workers regulations which came into effect on 1st October 2011. This increases the likelihood of recruitment agencies being deemed the employer of the temporary workers, and as such, increases their exposure to vicarious liability. In one example, a recruitment agency supplied a construction project manager to a London local authority, who over the course of two years was accused of approving 17 false projects and defrauding the council out of a staggering £2.8m. The council argued they are not supervising nor employing the worker, and that the recruitment agency is responsible for the actions of the workers they supply and are suing the agency for their loss – the case is on-going.
Employers Liability claims:
To provide some context, the term ’employee’ is not defined in statute, and the term ‘agency worker’ is not even mentioned. The employment status of temporary workers is therefore unclear in law and there have been no cases in court which have set a legal precedent. As such, all companies involved with the employment and placement of a temporary worker (including umbrella companies, 2nd tier agencies, master vendors, and the hiring client) can be deemed to be the joint or sole employer of that worker. In the event of injury or illness suffered by a temporary worker, all parties will be brought into the legal proceedings, and recruitment agencies therefore need to arrange employers’ liability cover with an insurer which is clearly including the temporary workers in their policy. Ordinarily, a recruitment agency will only have to pay defence costs, but with an increasing amount of non-standard contracts being used, agencies are more commonly found to have been at least partly negligent, since they do have a duty of care over all workers and this is especially the case with claims involving blue collar workers where injuries are usually more serious than in the white collar sectors.
Public Liability claims:
Since the employment status of temporary workers is unclear, a recruitment agency can also be found responsible for ‘third party’ bodily injury and property damage. A common type of recruitment agency public liability claim involves medical or care workers transporting patients from a chair to a bed for example. If the patient is injured because they were not lifted properly, or only one carer was assisting when two are required, the patient can make a public liability claim against the agency. Another common claim in this sector involves administering the incorrect quantities of medicine.
Drivers negligence is designed to cover damage to end clients’ vehicles when the driver they have supplied has been at fault. Typically this is cover is only available for agencies supplying ‘professional drivers’ with LGV licences and above. Most common claims are:
- Drivers being unfamiliar with how the lifting mechanism of the trailer operates, often overloading them, and damaging the lorry
- Drivers opening doors into bollards, reversing into objects, crashing whilst parking
- Drivers often fail to check or are unfamiliar with the dimensions of the vehicle, and an incredibly common claim is for drivers crashing lorries into bridges!
Cyber & Privacy Liability:
Recruitment is a massive ‘data’ business and by the nature of their industry they’re holding and processing an awful lot of confidential data – CVs, salary details, bank details etc. They’re also conducting a fantastic amount of business online and through social media sites, so with such a bank of confidential data, and so much of it used online, it’s essential to have full cyber and privacy coverage just in case there is a security breach, virus or hacking attack and the hiring client suffers a financial loss as a result.
For help and advice about insurance for Recruitment Companies please contact Tony Gibbs on 0118 9165 485.
*Information correct as of 1st December 2017