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Liability insurance

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Employers’ liability insurance

An employers' liability policy (sometimes referred to as EL) protects employers against claims brought by their employees who have sustained an injury in the course of their employment where Accident Compensation Commission (ACC) does not provide cover.

Employers' liability insurance protects you against settlements or damages, including defence costs, as a result of an employee suffering bodily injury arising out of their employment.


Do you need employers’ liability insurance in New Zealand?

Yes. Everyone in New Zealand is covered by ACC whether they are at work, at home, or anywhere for accidents and mental injuries suffered because of an accident or certain criminal acts. However, employees can still sue for work-related illnesses or situations that are not covered by ACC.

Every New Zealand employer is potentially at risk. Claims can be made based on recklessness on the part of the business and its directors. Most claims seek a lump sum payment based on pain, suffering, and loss of enjoyment of life. Employers' liability insurance protects business owners from the financial impact of such claims.

What employers’ liability insurance cover?

Employers’ liability insurance covers the costs associated with personal injury claims as well as the cost of defending them. Employers face exposure to personal injury claims from employees in a variety of situations, including:

  • injury caused by stress
  • depression, anxiety or mental anguish
  • disease or infection caused by air conditioning systems or passive smoking
  • bystander claims caused by witnessing a traumatic injury or fatality
  • nervous shock or fright
  • heart attack or stroke caused by stress
  • disease arising from circumstances where the employer has failed to provide a safe workplace

Our brokers can advise you on the best business insurance solutions to protect you against claims made by employees. They will work with you to create a tailored, cost-effective insurance liability package that fits with your business. And if a claim does arise, we'll work with you for a resolution.

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Gradual process claim

After several years working for a pest control contractor an employee started to develop health problems, including nausea and skin disorders. He underwent weeks of medical tests until it was finally revealed that these problems were due to prolonged exposure to the chemicals used in fumigation. Unfortunately, as a ‘gradual process’ claim, no compensation was available through ACC at the time. Instead, the employee took a civil suit against his employer and their employers’ liability policy stepped in to pay defence costs and cover damages awarded.

PTSD claim

A film production company had a contract with a Government department to produce videos for personnel training. The work involved was done solely by a specialist employee. Much of this work involved filming and editing disturbing material. The employee eventually developed a severe stress condition and his employment was terminated on an agreed basis. Nonetheless, he took additional legal advice and a civil a claim was made against the employer. The court found that the stress was caused by the nature of his work and that the company had failed to take adequate precautions to mitigate his stressful duties, despite being aware of the issue for a long period of time. Insurance covered the award to the employee plus the employer’s defence costs.

Occupational overuse claim

An employee from an IT department developed occupational overuse syndrome. ACC declined the man’s claim, for a variety of reasons. He then sued his employer. The employer’s insurance covered defence costs and the amount needed to settle the claim.