ADVERTISEMENT FEATURE - Insurance implications of physical and sexual abuse

The recent high level media coverage of alleged child abuse incidents committed by employees has naturally led to heightened concerns among nursery owners and managers. Del Sharman, Underwriting Manager at Pound Gates Insurance Brokers, outlines the insurance implications of abuse occurring in the setting and aims to support owners and managers in understanding how the subject of abuse is dealt with from an insurance perspective.

As nursery owners and managers you will be acutely aware of the responsibility and duty of care owed towards the parents of children in your care. This duty of care also extends to make you liable for the acts of your employees.

Abuse – legal definition?

There is no legal definition of abuse. However, in the context of legal liability and insurance, it may be encapsulated as:

• A situation where there is a duty of care owed to a vulnerable person – vulnerable due to age and/or disability; and
• There is a breach of that duty by: -
• The sexualisation of the victim and/or use of the victim for non consensual sexual gratification;
• An excessively harsh regime or systematic maltreatment, neglect or assault.
• Vicarious Liability – recent developments in case law

In 2002 the House of Lords made the landmark decision in Lister v Hesley Hall Ltd that an employer was vicariously liable for the abusive acts of an employee. In this case it was held that there was sufficient connection between the employee’s work and the abuse for it to have been committed in the course of employment.

Public Liability insurance cover

As outlined above as owner or manager of your nursery you could be held vicariously liable for the actions of your abusive employee. In addition liability for abuse is often ‘strict’. In other words there is no requirement for somebody to prove that you were negligent. This is particularly the case where the individual who perpetrated the act has been successfully convicted under criminal law of the offence. It is therefore vital that you have a clear understanding as to whether your Public Liability insurance extends to protect you against acts of abuse committed by your employees.

Where the policy is written on the traditional basis of ‘legal liability for accidental bodily injury’ there is no need to refer specifically to injury arising from abuse. Insurers will be covering the act of abuse within the definition of bodily injury and up to your full public liability limit of indemnity.

Furthermore, this cover would normally be written on a ‘claims occurring’ basis. This means that if an incident comes to light now which actually happened 30 years ago, the policy that was in force in 1981 would respond to and deal with the claim.
If a parent brings an action for abuse-related injury (physical or psychiatric) an insurance cover written on the above basis should provide an indemnity if:

• There is a legal liability;
• The event is accidental and not a deliberate act by the Insured in person (even though it may be a deliberate act by an employee or volunteer for which the Insured is vicariously liable).

In recent years some insurers have taken the decision to exclude abuse from their Public Liability insurance cover. Depending on the insurer customers may be offered the option to ‘buy back’ abuse cover through payment of an additional premium. However, when cover is bought back it is often with a much lower policy limit (typically £250,000 or £500,000) and on the more restrictive ‘claims made’ basis.

A ‘claims made’ basis means that the incident must have occurred AND be reported to insurers during the policy period, otherwise the policy will not provide indemnity. Often insurers that write cover on this basis will provide a ‘retroactive date’ which would typically be the original inception date of your policy with that insurer. In other words if you had been with that insurer for 5 years you would be protected against claims for abuse incidents provided the incident occurred on or after the retroactive date. The problem is that often abuse claims do not come to the surface for 20 or even 30 years and therefore cannot physically be reported to insurers during the period of cover that was applicable when the incident occurred or within the retroactive date, unless of course you had been with the same insurer for the last 30 years.

If your insurer has a public liability wording that contains an exclusion for acts of abuse then you should:-

• check to ensure that you have purchased the abuse cover extension (if it is available from your insurer) and make sure you understand the basis of claims settlement (claims occurring or claims made);
• Consider switching to an insurer that offers cover on a traditional (claims occurring) basis with no abuse exclusion.

Public Liability insurance can be a very technical area of cover and it is not possible to fully explain all aspects of the cover as they relate to abuse within this article. For further guidance and advice I would therefore strongly advise that you contact your insurance broker or adviser.

For more information please and to talk to an expert contact our Early Years Business Support Team today on 0845 271 3262, visit www.poundgateschildcare.com or email childcare@poundgatesib.com.