Top considerations for recruitment agency insurance

Commercial Director at Qdos, Sam Cox, dives into the finer details of recruitment agency insurance requirements.

All businesses need insurance to some extent. However, when it comes to recruitment agency insurance there are a few areas that require a little more specialist attention. So, let’s take a look at what the top policies are for recruiters and answer some of your questions about them.

Professional Indemnity

Professional Indemnity Insurance protects a business in the event that they are alleged to have caused a third party a financial loss due to negligent actions or omissions.

Policies will cover the cost of defending a claim as well as any damages awarded to the third party in the event that such defence is unsuccessful.

Public Liability

Public Liability Insurance protects your business in the event that a claim is raised against your business pertaining to the injury of a third party or damage to third party property.

Similarly to Professional Indemnity, our Public Liability Insurance offers to cover the legal cost of defending a claim as well as any damages found owing as a result.

All businesses should carry these types of policy to varying degrees. But in the recruitment space there are a few specific considerations that need to be kept in mind. This is largely due to the contract structures and how these businesses operate with the workers that are provided to third parties.

Why recruiters need to be careful when arranging insurance

A lot of it comes down to vicarious liability. Vicarious liability, in short, is where one party takes responsibility for another. The best example of this is an employer-employee relationship.

For example: I am employed by Qdos. If I make a mistake or error in the services that I provide and that causes a third-party loss, and there is a legal case to be heard in respect of that mistake, then that will be brought against Qdos as a business rather than me as an individual. In this case, Qdos is vicariously liable for me and the work I fulfill.

Within the recruitment industry, the ‘employer’ of the worker isn’t always clear cut, and therefore exposure to vicarious liability can be uncertain. Where there are contractual terms in place between not only an employer and employee, but potentially a recruitment business, hiring organisation, and umbrella or payment company (where there is one involved), this could muddy the waters in respect of who is responsible for the actions of the worker.

So, it’s really important that recruitment businesses understand to what extent they are exposed to vicarious liability and make sure that their Professional Indemnity Insurance and their Public Liability Insurance policies respond accordingly.

How to start looking at your recruitment agency insurance requirements

The first step will always be to take a look at contracts. The contract will set out how liability attaches in the event of a claim, and it should be discussed with the broker at the point of arranging cover.

There are no hard and fast rules, but in general, if you are placing workers on a permanent basis only or your contract terms are structured in such a way that you are completely removing the vicarious liability for the actions of those workers, it may be suitable for you to insure on an ‘excluding vicarious liability’ basis.

Insuring on an ‘excluding vicarious liability’ basis reduces the cost because you’re only insuring your own recruitment activities and not the actions of the worker. However, this ultimately doesn’t cover you if the worst should happen and you are somehow drawn into a claim relating to something that a worker has done.

Businesses placing temporary or contract staff will need to be especially careful here. Even if your contracts are strong, there can be circumstances where a hirer, a third party, or even a worker themselves could try to bring a claim against you as a result of an error that has happened during the provision of services. Strong contracts will, however, help you avoid litigation and keep insurance costs down.

What’s the next step?

Ultimately, reach out to a specialist provider for the self-employment industry who will provide you with all the information you need to make the right decision for your business.

Qdos has been supporting the flexible working industry for over 30 years and has worked closely with numerous recruitment agencies and umbrella companies to deliver tailored insurance offerings during this time. Call our expert team on 0116 478 3390 to discuss your requirements, we can guide you through the specifics of what you need and help you get a suitable package of policies in place.