Some Insurance Considerations surrounding the Government’s Coronavirus Job Retention Scheme

The economy and businesses worldwide have undoubtedly been affected by the Covid-19 pandemic. In the UK the Government has set up the Coronavirus Job Retention Scheme (CJRS), with one the main measures being the ability for employers to furlough staff. The scheme enables an employer, who furloughs an employee, to recoup from the Government up to 80% of their wages up to £2,500 per month plus contributions such as employer national insurance contributions and pension contributions. The employer can ‘top up’ the employee’s salary to 100% but they can only recover 80% under the scheme.

The scheme also means that employees should not work during furlough for their employer or associated organisations. An employee who was recently made redundant may be re-hired and furloughed as well.

Businesses do, however, need to consider how furloughing staff may impact upon their insurance. Insurers should be notified as soon as a claim is made in a ‘reasonable and practicable time’.

Various questions and insurance related issues arise out of the scheme and the decision to furlough from the business’ insurance perspective. For instance, what if a company decides not to furlough because they feel it is wrong in principle to burden the taxpayer by using the scheme where it has Business Interruption (BI) insurance under which, in principle, its losses are covered? An argument could be made that the business ought to have furloughed its staff instead and recoup under the scheme in order to minimise its losses.

What if the employer furloughs staff but decides to top up the employee’s wages to 100% – again, is there an argument the employer has failed to minimise its losses?

Insurance liability is therefore something every employer should be alert to and keeping evidence of any claim submitted is key.

We are offer a free 10 minute consultation with a consultant-Barrister, Martin Khoshdel from 42 Bedford Row Chambers to advise on any complex employment relate query.

By Suezanne King


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