Can an Employee bring a claim against their Employer’s insurer?
If your employer becomes insolvent, you may still be able to make a claim for unfair dismissal or discrimination, if your employer had a valid insurance policy covering potential liability for Employment Tribunal claims.
In a recent case, Irwell Insurance Co Ltd v Watson and ors, the employee, Mr Watson, resigned and brought a claim of disability discrimination and unfair constructive dismissal. The employer had an insurance policy in place covering its liability in respect of employment claims. The insurance company was Irwell Insurance Co Ltd.
The employer went into a credit’s voluntary liquidation and so the employee joined the insurance company as a party to the proceedings.
Initially, the Employment Tribunal concluded that it had no jurisdiction to determine the outcome of the dispute, arguing that it was a contract of insurance and therefore a matter for the civil court, rather than an employment contract issue. However, the employee appealed this decision and the matter was referred to the Employment Appeal Tribunal (EAT). The EAT reviewed the case and decided that under Section 1 of the Third Parties (Rights against Insurers) Act 2010, the employer was a ‘relevant person’ under the Act.
The Third Parties (Rights against Insurers) Act 2010 enables third parties to claim against an insured party, provided the insured party is a ‘relevant person’. Generally speaking, companies in liquidation fall into the category of a ‘relevant person’. Interestingly, prior to this Act coming into force, an employee would have had to bring two sets out claims – one in the Employment Tribunal and one in the Civil Courts for breach of contract. The Act saved many people significant costs and time, as it allowed for a consolidated claim to be brought within the Employment Tribunal only.
Upon considering the employee’s appeal, the EAT determined that the Employer’s rights under the insurance contract had transferred to the Employee as a third party. Now that the employer had gone into liquidation, the employee had a right to pursue his claim against the Insurance Company directly. This resulted in the employee’s claim for unfair dismissal and disability discrimination being successful.
If your employer goes into liquidation but you believe that you have been unfairly dismissed, constructively dismissed, or subject to discrimination at work due to your age, sex, disability, race, gender or pregnancy, you may still be able to make a claim if your employer has a valid insurance policy in place.
If you wish to discuss this further or would like us to review your employer’s insurance policy, please do not hesitate to contact our employment partner, Kate Brooks on 01202 525333 or firstname.lastname@example.org.