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Employer Liability Insurance in Portugal: Quick Guide

By Bernardo Barbosa

Published on 31 January 2024

7mins read

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Not to be confused with Public Liability Insurance and Professional Liability Insurance, Employer's Liability Insurance is mandatory in Portugal. Essential for all types of businesses (especially those most subject to workplace injury or illness), this type of insurance is perfect for filling in the gaps in workers' compensation insurance.

But what is Employer's Liability Insurance? What does it cover? And how much does it cost in Portugal?

What is Employer's Liability Insurance (Seguro de Acidentes de Trabalho)?

Known as Seguro de Acidentes de Trabalho in Portugal, Employer's Liability Insurance is a type of business insurance that protects employers from financial loss in cases where an employee sues due to a work-related injury or illness not covered by workers' compensation.

While workers' compensation covers medical expenses and lost wages relating to workplace injury, there are instances where employees might sue their employers for negligence or unsafe working conditions. Employer's Liability Insurance coverage includes legal fees, settlements, or judgments in such situations, providing financial protection to the employer.

Does My Small Business in Portugal Need Employers' Liability Insurance?

If you have hired employees in Portugal, Employer's Liability Insurance is typically mandatory. Portuguese law mandates that employers must have coverage for their employees against workplace accidents and occupational diseases.

The specifics and requirements might vary based on the nature of your business, the number of employees, and other factors, so it's advisable to consult with an insurance professional or legal expert in Portugal to ensure compliance with the regulations.

What Does Employer's Liability Insurance Cover?

As previously stated, Employer's Liability Insurance covers various aspects related to claims of employee's work-related injuries that are not included in the workers' compensation coverage.

Employers' Liability coverage typically includes:

1. Legal Expenses: It covers legal fees and court costs if an employee sues the employer due to a work-related injury or illness. This includes the cost of hiring lawyers, court fees, and related expenses.

2. Settlements: If the lawsuit results in a settlement or a court judgment against the employer, the insurance helps cover the financial payouts required.

Employer's Liability coverage can also include instances that usually carry workers' compensation insurance, such as medical bills, lost wages, and other damages. However, it's essentially used for covering costs related to negligence claims and punitive damages.

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The Pros and Cons of Employer's Liability Insurance Coverage

These are the main advantages and disadvantages of getting Employer's Liability Insurance as a business owner:

Pros:

1. Legal Protection: Employers' Liability Insurance shields big and small businesses from the financial impact of legal claims brought by employees for work-related injury or illness not covered by workers' compensation.

2. Financial Security: It helps cover the costs of legal defense, settlements, or judgments, reducing the potential financial burden on the business.

3. Employee Assurance: It demonstrates a business owner's commitment to employees' well-being, potentially boosting morale and loyalty within the workforce.

4. Compliance: It's mandatory in many jurisdictions, meaning it's required for business compliance.

Cons:

1. Costs: Employers' Liability Insurance premiums can be a pricey added expense, especially for small business owners operating in high-risk sectors.

2. Misuse: Some employees might view this insurance as an opportunity for making fraudulent employee claims, potentially raising premiums over time.

3. Limited Coverage: There could be specific exclusions in coverage that will force a business owner to acquire additional stop-gap coverage.

4. Complex Claims Process: Navigating claims and ensuring all requirements are met can be complex and time-consuming.

How to Obtain Employer's Liability Insurance in Portugal

In Portugal, the Seguro de Acidentes de Trabalho is normally sold by a private insurance company and acquired by the employee. To obtain Employer's Liability Insurance, you should:

1. Select an Insurance Company: Research and contact insurance companies licensed to offer Employer's Liability Insurance in Portugal. You can find these companies through online lists, Google searches, referrals, or consulting with insurance brokers or agents.

2. Request Quotes: Contact multiple insurance providers to request quotes, and don't forget to inform them about the ins and outs of your business: What's the nature of your company? How many employees do you have? All of this will weigh on the final price of your premiums.

3. Select an Insurance Policy: Review the quotes and compare the coverage, premiums, deductibles, exclusions, and additional services offered by each insurance provider. Choose the insurance policy that best suits your business needs, offers adequate coverage, and aligns with your budget.

4. Complete the Application: Fill out the necessary forms and provide the required information to apply for the selected policy. The insurance company might conduct an evaluation based on your business's risk factors. Once the application is approved, pay the premium for the policy to activate the coverage.

How Much Does Employer's Liability Insurance Cost?

The exact cost of an Employers' Liability Insurance policy in Portugal is hard to determine, as the price of this type of insurance policy varies depending on factors such as:

  • **The Type of Business Sector:** Certain industries, such as construction or manufacturing, have higher risks of workplace injuries, which can lead to higher premiums.
  • **The Number of Employees:** The more employees you have, the higher the potential risk exposure, which can influence the cost.
  • **The Company's Claim History:** A history of past claims or workplace incidents can impact the premium. Businesses with a record of frequent claims might face higher premiums.
  • **The Company's Location:** Regional insurance costs and regulations differences can affect pricing.
To know the approximate cost of your company's Employer's Liability Insurance, visit the Seguro de Acidentes de Trabalho simulator provided by the Portuguese Association of Insurers and fill out all necessary information.

Employers' Liability Insurance vs. Workers Compensation Insurance

Employer's Liability Insurance is often mistaken for workers' compensation insurance, but there are big differences between the two.

Most workers' compensation policies cover stuff such as medical bills, death benefits, and employee's injury or illness. While they protect the employer from costs related to these instances, their ultimate goal is to protect the employee.

Employer's Liability Insurance, on the other hand, is mainly designed to protect employers from their own employees. An injured worker, for example, can decide to file consequential bodily injury lawsuits against his own company in case he feels like he's been mistreated. Employer's Liability Insurance covers the legal costs associated with such lawsuits.

Employers' Liability Insurance vs. Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance (EPLI) is a type of insurance coverage designed to protect businesses against claims made by employees alleging various employment-related issues. These issues can be:

1. Discrimination: Allegations of discrimination based on age, race, gender, religion, disability, or other protected characteristics.

2. Harassment: Claims of sexual harassment, hostile work environment, or other forms of workplace harassment.

3. Wrongful Termination: Allegations of wrongful termination, retaliation, or dismissal.

4. Breach of Employment Contract: Claims related to breaches of employment contracts, including issues like non-compete agreements or wrongful demotion.

5. Mismanagement: Allegations of mismanagement of employee benefits or policies, leading to financial losses for employees.

Employer's Liability Insurance and Employment Practices Liability Insurance have a similar goal: protecting employers from work-related legal costs. However, the first covers mainly cases of employee's injury not covered by workers' comp, while the latter covers mainly wrongful acts associated with the employment process.

Employer's Liability Coverage Lawsuits

So, we have already learned that Employer's Liability Insurance is mainly destined to protect employers from injury-related instances not included in typical workers' compensation coverage. But what types of lawsuits, legal costs, and punitive damages does it actually cover?

Well, here are a few noteworthy examples:

1. Dual Capacity Lawsuits: In which the employee sues the employer not only in their capacity as an employer but also in an additional role or capacity.

2. Loss of Consortium Lawsuits: Third-party lawsuits typically filed by a spouse or immediate family member of an employee who has been injured, disabled, or killed due to someone else's actions or negligence.

3. Consequential Bodily Injury Lawsuits: For cases of employee injury not covered by workers' compensation insurance.

4. Employee Lawsuits: Any other type of work-related lawsuit not covered by your workers' compensation policy.

Conclusion

It only takes one particularly bad employee's work-related injury to mess up an employer's day. Purchasing Employers' Liability Insurance is the only way of ensuring unexpected accidents won't affect your business's financial stability and reputation, even if you're already covered by workers' compensation!

To take your business to the next level without being afraid of what might happen, ensure you're protected by robust Employer's Liability Insurance and workers' comp policy.

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Written by Bernardo Barbosa

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