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EMPLOYER’S INSURANCE – IMPORTANT ISSUES

According to the Health and Safety at Work Act of 1996 (89 (I) / 1996), an employer is defined as "any natural or legal person who has an employment relationship with the employee and is responsible for the premises, business and/or facilities and includes a person who may not have other people employed under him, but who conducts economic activity or business either for profit or not».

Based on the above, the definition of the term employer is very broad and includes even the self-employed. The key element to characterize a person as an employer under the above law is therefore twofold, primarily the existence of an employment relationship and the burden of responsibility for the company and its management.

Who is therefore an employer and who is an employee?


Regarding the first criterion, i.e. when an employment relationship is created/exists, the Cyprus Courts have extensively ruled on this issue. More specifically, in Cleanthis Christofides Ltd v. 1.The Fund for Redundant Employees, 2.YiannakisFlorides (1978) 1 C.L.R. 2008, the Supreme Court made reference to the factors to be taken into account to distinguish an employment contract (contract of service) by an independent service contract (contract of services) by adopting excerpts from the English cases Global Plant Ltd. v. Secretary of State for Healthy and Social Security [1971] 3 All ER 385 and Market Investigations Ltd. v. Minister of Social Security [1968] 3 All E.R. 732 that stated: (a) that other factors beyond the criterion of the degree of control exercised by the alleged employer should be considered to answer the question whether, in the present case the relationship was a worker's employment or services relationship and (b) that the fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?'. If the answer is 'Yes', then the contract is a contract for services. If the answer is 'No', then the contract is a contract of service". No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task. The Supreme Court further made reference in other English case law such as the case of Fergusan v. John Dawson & Partners (Contractors) Ltd. [1976] 3 All E.R. 817 and Ready Mixed Concrete (South East) Ltd. V. Minister of Pensions and National Insurance [1968] 1 All ER 433 and pointed out that although the explicit intention of the parties may be a relevant factor in deciding the true relationship between the contract, however it is not the deciding factor. The arrangement should be considered as a whole and in particular the obligations and rights of the parties should be taken into account. A statement by the parties even if incorporated into their contract that the employee is or is to be deemed to be self-employed or as an independent contractor should be ignored completely rather than simply not be taken into account as a key element, if the rest of the contractual terms governing the relationship are terms of an employer - employee relation during that relationship of parts specified by law and not by the label they choose to give it.

Furthermore, in the textbook Halsbury's Laws of England, 4th Edition, Vol. 16 (1A) on page 14 it is stated:

"Test whether a person is an employee at common law. There is no single test for determining whether a person is an employee. The test that used to be considered sufficient, that is to say the 'control' test, can no longer be considered sufficient, especially in the case of the employment of highly skilled individuals, and is now only one of the particular factors which may assist a court or tribunal in deciding the point. More recently, the 'integration' test had been suggested, proposing that the important question was whether the person was integrated into the enterprise or remained apart from, and independent of, it. However, while both of these factors are still pertinent, the modern starting point for deciding whether a contract of service (now generally referred to as a 'contract of employment') exists is to ascertain if:


(1) the servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master ('mutuality of obligation');
(2) he agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master ('control'); and
(3) the other provision of the contract are consistent with its being a contract of service.

The final classification of an individual now depends upon a balance of all relevant factors, fine though that balance sometimes might be, with 'mutuality of obligation' and 'control' being seen as the 'irreducible minimum' legal requirements for the existence of a contract of employment. The factors taken into consideration may include: the method of payment; any obligation to work only for that employer; stipulations as to hours; overtime, holidays etc; arrangements for payment of income tax and national insurance contributions; how the contract may be terminated; whether the individual may delegate work; who provides tools and equipment; and who, ultimately, bears the risk of loss and the chance of profit. In some cases the nature of the work itself may be an important consideration ".

Employer's Obligations

Once you establish the existence of an employment relationship i.e. that of an employer with his employees, the employer shall be responsible, inter alia, for the obligations set by the Health and

Safety at Work Act of 1996.

According to the latter (art. 13) each employer is responsible for ensuring the safety, health and welfare of all his employees during and at the place of employment; while even more every employer is responsible to run his business or conduct his activities in such manner and to provide such information so as to ensure, so far as it is reasonably practicable, that even persons not employed by him, but that may be affected by the activities of the company, will not be exposed to risk."

Furthermore, according to Article 54 of the above Act in any proceedings relating to an offense committed in violation of any provisions of the above Act, which consists of any omission of any person to comply with an obligation or requirement to perform his duties under the act, insofar as such compliance is actually practicable, or is reasonably practicable, it is the responsibility of the accused to prove that he has taken all practicable or reasonably practicable measures in fulfillment of the obligations or requirements posed to him by Law.
In other words, the employer becomes ipso facto responsible for anything that may happen to the employee within and in relation to the employment and the employer bears the burden of proof to prove that he took all legitimate and necessary measures to avoid the adverse incident to the employee.
Relatively, the Management of Health and Safety at Work Regulations 173/2002, in particular Article 2, provides that the employer must take all "preventive and protective measures" i.e. all such measures determined by the employer or the self-employed person as a result of personal assessment, which are required to be taken in order to ensure the safety, health and welfare of persons at work and to protect any other persons against risks to safety and health in relation to the activities of persons at work.

Employer's Liability Insurance

As can easily be seen from the above, the employer's responsibility towards its employees but also to others is very broad, and you and your business can be exposed in an unbearable financial burden.

For this purpose, the Cyprus legislature, following, European standards, has enacted the Law on Compulsory Employers' Liability Insurance of 1997 establishing as a mandatory requirement for every employer to have employer's liability insurance. This insurance includes coverage for legal liability of the insured Employer for payment of compensation to employees in connection with death or bodily injury by accident or occupational disease caused as a result of and during their employment in Cyprus.

Current Limits of liability, as defined by the above Law are:
For each employee € 160.000
For each occurrence € 3.415.000
For each period of insurance € 5.125.000
Regarding the height of the above limits of liability it is indicative here to mention the case of DG ICOS SICAPI LTD v. DG PRODUCTS LTD etc. No. 22/2008 and 23/2008, 22/10/2012, where the defendants were sub-contractors and were using an employee to perform various tasks. The employee was injured when, while working on the construction of buildings of the University of Cyprus in Aglantzia, he crashed into a pit's depth of beyond 15 meters. The Court found that the subcontractor was in control of the premises and he was convicted to pay a compensation to the injured of £ 250.000 (€ 427.150).

Of course, if the employer wishes he can be extend the insurance coverage beyond the above mandatory limits by paying a proportionate increase in the premium.

But when is the employer covered?

Firstly it should be noted that the minimum insurance only covers employees. Accordingly, in case somebody is not considered as an employee (e.g. a customer, independent employee etc), although the Employer, as we said, will bear responsibility for that person's security, nevertheless, the Employer will not be covered by his Employer's Liability Insurance in case such person suffers an accident at the work premises of the Employer and subsequently sue the employer for same. Indicatively, in the Department of Labour, v. DPK PAPHOS KARTING CENTRE LTD et al, Cause No.: 1330-1309, 2011, a Client was injured driving a vehicle type Go Kart, she had rented by the Defendant. The vehicle hit on the protective barrier of the track but the Client was fatally injured. The company was found guilty under the above law (the Health and Safety at Work Act) because it did not have a written assessment of the risks to the health and safety of persons not employed by it which are created by or in connection with the way they conduct activities or run the business and it was found guilty of criminal and civil offenses for which they had to pay large amounts.

It is also important to mention that the compulsory statutory insurance covers only the liability of the Insured Employer for payment of compensation to employees in connection with death or bodily injury caused by a work accident or an occupational disease caused as a result of and during their employment in Cyprus.

Therefore it is important for the scope of insurance coverage to examine what constitutes a work accident and an occupational disease.
Relatively, in accordance with the Law on Compulsory Employers' Liability Insurance 1997, an "accident" means any event which may cause death or injury to any employee if the incident is caused by and during the employment of the employee.

An accident in the course of employment of the employee shall be deemed as an accident covered by the provisions of this Act unless the contrary is proved.
As interpreted by the Cyprus courts, a work accident must be due to a sudden violent external event causing temporary or permanent inability to the employer to work. That is, with respect to the definition of a work accident, same is extremely wide and covers almost every case of an external event that may cause temporary or permanent incapacity for work which is caused by and during the employment of the employee.

But what constitutes an occupational disease?

According to the Law on Compulsory Employers' Liability Insurance Act of 1997, "occupational disease" means any disease or injury, as those are stated in the two columns of the table set out in the Social Security Administration (Diseases) Regulations 1980;

This legislature's choice of the above Regulations and the persistence to such choice even with the amendment to the Act in 2012 is strange as the labor reality in Cyprus has changed radically since 1980.

Thus diseases that are now inextricably linked with the labor reality may not be included in the above list, leaving the employer exposed to lawsuits for damages. As an illustration, various skin disorders like eczema are very common to employees in the hairdressing sector, the catering business etc. Additionally, eye disorders caused by the extensive use of the PC are a very common medical condition of employees in administrative posts. Even more common are diseases which are associated with stress that is often a work product. Indicatively, in Australia they have already recognized that many mental disorders are directly linked with the work environment and have integrated them in to the main insurance cover.


In contrast, in Cyprus in any one of these cases, if the employer chooses to only get compulsory insurance as provided by law, he will most probably be found liable for damages, which may be particularly significant / high.

Quick Tips to Employer's Liability Insurance

1. Prefer an insured amount greater than the minimum prescribed by the law. In cases of serious injury to one employee you may find yourself financially exposed by the minimum insurance coverage prescribed by the law
2. Prefer an insurance that contains the expanded definition of the term employee i.e. that which clearly states that the term "employee" means: any person that will be deemed by the courts like an Employee'', instead of the usual definition that provides that an "employee" is '' any person Employed directly by the employer.''

3. Prefer an insurance that does NOT EXCLUDE occupational safety, instead of an insurance policy that only covers occupational diseases as defined in the two columns of the table exposed to the Social Security Administration (Diseases) Regulations 1980;

4. Prefer an insurance from a large and financially strong insurance company with a proven experience in employer's liability insurance and long-term market presence

5. Prefer to work with a qualified and experienced insurance advisor who works with various insurance companies to be able to advise you impartially and correctly.

For more information please contact me at 22 26 96 46 or fill out the contact form below and we will be very pleased to answer to your questions and give you a proposal for this type of insurance if you are interested.

Savvas P. Christoforou is a Chartered Insurer and the CEO of Insurance link.

This study has been developed to provide you with a simple guide for those interested about the liability of employers and insurance provided for same, and it is taken from various insurance and other legal sources. It is not a comprehensive or complete analysis of the law nor does it constitute legal advice. The views expressed are strictly personal of the author and do not represent the company that employs him. If there are any errors, they are of the author. Readers are encouraged to obtain independent legal or insurance advice before applying the information contained in this study

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