Recruitment agencies may be contractually liable for the negligent acts, errors, and omissions of the temporary workers they place with hiring companies. While some businesses may lack insurance protection against this exposure, others may not be required to cover vicarious liability under contract and could be paying for cover unnecessarily.
Below, we explain what vicarious liability is, whether insurance cover is right for your business, and how to select a suitable policy.
What is vicarious liability?
Vicarious liability is a type of liability that arises when one party is responsible for the actions of another either by law or contractual obligation.
Claims example: A recruiter provides a temporary construction worker to a project to build a new warehouse. The recruiter has signed the hirers contract which includes a requirement for the recruiter to cover any negligent acts, errors and omissions of the temporary worker they provide. The temporary worker begins constructing a wall, but after a few days it is discovered that their work is not up to the standard or the specification required, so the wall needs to be demolished and rebuilt at a cost of £7,500. As the recruiter is responsible for the workers errors under contract, the hirer could raise a claim against you for this additional cost. |
Is a Vicarious Liability Extension right for my business?
Cover for vicarious liability can be added as an extension to your existing Professional Indemnity Insurance (PII) (opens a new window) policy.
There are additional premium costs for adding an extension to your policy. As a result, it’s important to know whether such cover is necessary for your business.
You should consider additional protection for vicarious liability if:
You are signing hirer contracts that specifically require you to be liable for the negligent acts, errors, and omissions of the temporary workers you provide.
By contrast, you do not need additional protection if:
You are signing hirer contracts that do not specifically require you to be liable for your temporary workers (this accounts for the majority of hirer contracts).
You only ever provide workers under your own Standard Terms of Business.
Does my provider matter?
Not all policies are identical. Multiple products exist on the market offering cover for vicarious liability, but the practicalities of the cover may differ.
Lockton’s Vicarious Liability Extension:
Provides indemnity in the event you are contractually liable to cover the financial loss caused to a third party by the negligent acts, errors and omissions made by a temporary worker you provide. Simply put, this means that if you sign a contract in which you accept liability, and a claim is raised against you, our insurers will respond.
Other policy wordings:
May offer cover for vicarious liability, but only if the initial error was made by you (the recruiter). Negligent acts, errors, and omissions made by the temporary worker may not be covered. In the event of a claim, you could be forced to pay the cost.
Does PII protect against vicarious liability?
Standard PII protects your business against claims brought by third parties due to negligent acts, errors, or omissions in the work you have carried out for them. It does not provide cover for vicarious liability.
Guidance is available
If you have any doubts regarding a specific contract, Lockton are available to review the contracts and offer guidance. However, we are not legal advisers, and will always recommend that recruiters seek legal advice before signing any hirer terms.
Reach out to a member of our team for more information about your existing cover, or whether adding cover for vicarious liability is right for you.
For more insights, visit our Recruitment (opens a new window) page.
