| |
| 3
March 2010 |
Visit Kennedys online » |
Iberian
and Latin American BriefEmployers' liability/workers' compensation insurance
Introduction Welcome to the latest edition of Iberia and Latin America Brief. I would like to introduce this issue by announcing that Kennedys were awarded 'Law Firm of the Year' and 'Insurance Team of the Year' at the 2010 Legal Business Awards held on 11 February 2010. These two awards demonstrate our firm's growth, success and continuing commitment to our clients. In this month’s edition we focus on employers' liability/workers' compensation insurance and what this means in different jurisdictions. We hope you enjoy reading this month’s edition and welcome any feedback you should have.
Alex Guilamont
Brought to you by Kennedys' London and Madrid offices, its associated
offices in Chile and Portugal and its network of specialist
insurance/reinsurance lawyers throughout Latin America. Spain In Spain, it is compulsory for employees to be included in the Social Security system, which provides comprehensive protection for employees in situations where a loss of income occurs, such as: temporary incapacity (due to accident or illness, whether occupational or not), health assistance, unemployment, maternity and paternity, permanent incapacity, retirement, etc. Benefits, principally financial in nature, are provided to compensate for these situations; these may be increased at the employer’s expense, through collective negotiation recorded in the corresponding Agreement. These benefits and, where applicable, health assistance, are managed either by the Social Security’s own management entity or through Mutuas (mutual insurance companies), in their capacity as collaborating entities. In addition to this protection, the law requires that the employer guarantees health and safety in the workplace, the employee’s right to effective protection being recognised. The regulations applicable in this matter arise from the Law on Prevention of Occupational Risks (LPRL) and the Law on Offences and Penalties in Social Order (LISOS). Specifically, the LPRL states that “an employer’s failure to fulfil its obligations concerning the prevention of occupational risks shall give rise to administrative liabilities and, where applicable, to criminal and civil liabilities for the damages and losses which may result from said non-fulfilment” (art. 42 LPRL). If an accident occurs due to an employer’s failure to fulfil its obligation to guarantee an employee’s health and safety, the employer’s liability shall be incurred in different spheres of the Law.
With respect to these last two spheres, sentences have been varied within the Civil Chamber of the Supreme Court. One interpretation is that the different types of compensation (civil and social) be kept independent and accumulated to compensate different aspects of damage, and the other is that the types of compensation are compatible but only until the damages are compensated, without however exceeding this limit, which would lead to a unjust acquisition of wealth by the employee (also doctrine of the Employment Chamber of the Supreme Court). Finally, the Supreme Court analysed this case law situation in the recent Sentence of 24 July 2008, and clarified the issue: “there should not be an absolute independence between that received as compensation for situations insured (socially) and for complementary civil liability; the latter should complement what has already been received, to avoid “over-compensation&r dquo;, that is, unjust acquisition of wealth; (…) Apart from setting these guidelines through legal rules, (…) a desirable coordination between its different Chambers, which are responsible for judging this problem, would help to create more order in the relevant case law." In addition to the foregoing, the General Law on Social Security establishes a surcharge of 30%-50%, to be paid exclusively by the employer, not covered by insurance, on all benefits to which the employee is entitled as a result of an occupational accident or illness, due to failure by the employer to comply with the appropriate safety measures. This Law itself establishes that this liability is independent from and compatible with all others, including criminal, as this surcharge is by nature a penalty and form of compensation. Some authors consider this surcharge by the offending employee as a gratuity or really a punitive indemnification, as in many cases it means exceeding reparation for the damages. Finally, Collective Agreements normally establish compensation for different types of cover, which vary according to the sector and associated risks (construction, hotel and catering, offices). Normally, sums are covered for death, total disability, absolute disability, serious disability and interment costs. To give an example, in the current General Collective Agreement in Construction, for 2010 compensation of €46,000 is stipulated for death or permanent absolute disability due to an occupational accident or illness. Many employers have set up an occupational accidents policy for their employees. This Insurance may have been set up voluntarily by the company, but may also be a requirement laid down in the Collective Agreement itself. This compensation shall be deducted from any which may be recognised if the company is declared legally liable, which is normally expressly established in the Collective Agreement. It should be noted that the frequency of claims in this area is very high. In fact, it is estimated that almost 30% of the compensation paid by liability insurer companies is in respect of occupational cases. Employer’s legal liability cover is not normally taken out autonomously, but forms part of a wider range of a commercial multi-risk style product, as optional cover to complement operational liability insurance. This type of policy not only covers the employer’s legal liability towards its employees, but also any liability towards the employees of other companies providing services within the insured party’s establishment and even those claims from entities which have provided assistance to the employee (the victim of the accident) for reimbursement of their costs. Employer’s legal liability insurance excludes all matters related to the employer’s failure to fulfil its obligations, such as fines or social security surcharges or failure to pay salaries; damages to property are also not normally covered by this insurance. The sum insured varies greatly, depending on the insured
party’s/policyholder’s wish; this party should be aware of the risks of
their activity. That is, an employer’s legal liability exposure is not the
same on a building site as in a shop, for which reason the premium and
insured sums must be adapted as a consequence. The same occurs with legal
defence cover, as the quantity and volume of legal claims that the
employer may receive differs greatly between the different
sectors. 
Chile Employers' liability for occupational accidents or illnesses In Chile, Law No. 16.744 on occupational accidents and illness uses the theory of company risk as a basis for employers' liability. This means that the search for the cause of the misfortune is abandoned, to concentrate on better meeting the needs resulting from such circumstances, going straight to the affected party, without waiting for the employer to take responsibility for him or her, personally or through insurance. In accordance with the provisions of the aforementioned law, the employers’ objective liability, as a result of the risk to which the employee is exposed, is covered by this company insurance, financed principally by contributions made by the employer. In other words, cover for the loss sustained by the employee, as a result of, or when working, will be triggered automatically regardless of who is to blame for the accident, whether the employer or the employee. The employer is responsible for financing the social insurance stipulated by Law 16.744. Employers must be affiliated to an administrative organisation and pay a percentage of the salary of each employee. Companies with high levels of occupational accidents or illness must also pay a percentage called “additional contribution for risk” which increases the social security premium. However, at the same time, article 184 of the Labour Code regulates the general duty of protection of the employer, in which the latter is required to take all necessary measures to effectively protect the life and health of employees, maintaining adequate health and safety measures in workplaces, and the tools required to prevent occupational accidents and illnesses. Employers must also provide or guarantee measures so that in the event of an accident or emergency employees can access opportune and adequate medical, hospital and pharmaceutical care. For its part, article 69 of the Law 16.744, an influential piece of legislation in this matter, establishes that when the accident or illness is due to negligence or culpability by the employing entity or a third party, without prejudice to any criminal actions that result, the following rules must be observed:
Thus, we can state that two types of liability coexist: one which is legal or objective, materialised by the employee’s right to demand the medical and financial benefits granted by the law, through a system in which the employer’s liability is limited to financing, without any distinction as to whether the event was caused by the latter’s negligence or culpability; the other is subjective in nature, the source of which is the negligent or culpable omissions of the employer or a third party, which must be proven by the victim. For both types of liability, objective and subjective, there are basically two types of risks covered:
The social security insurance and liability cover required of the employer by the law if the occupational accident or illness results from culpability or negligence by the employer covers consequential damage, loss of earnings and psychological damage. Insurance for employers' liability Chilean law provides a subjective liability regime for culpable or negligent acts or omissions by the employer that constitute the origin of an occupational accident or illness. The possibility of insuring this liability of employers through private insurance has also been considered. This would cover the payment of compensation established in a judicial sentence over and above the compensation paid by the company insurance stipulated in Law No. 16.744. Through these employers’ legal liability policies, insurers are
responsible for paying the compensation ordered by the courts against the
insured parties, originating from claims made by employees, their
successors or beneficiaries, in exercise of the legal liability action
laid down in article 69 of the Law 16.744. The purpose of cover is to
compensate the damages that employees may have sustained due to an
occupational accident, from which an employee of the policyholder sustains
bodily injury. 
Portugal Employers’ liability with respect to occupational accidents is regulated in the Labour Code and the Regulations of the Occupational Accidents and Illness Regime. The employer entity, whether private or collective, or governed by private or public law, is responsible for compensating the damages resulting from occupational accidents. However, the employer is obliged to transfer the liability for damages resulting from occupational accidents, to entities legally authorised to provide this insurance, as stated in articles 7 of the Occupational Accidents and Occupational Illness Regime Regulations (RRRATDP) and 281 of the Labour Code. When the employer takes out the policy with the insurer, it must provide the real value of the salary of its employees. The insurer will only be liable for payment corresponding to the salary declared. If the employer reports a lower salary than the real value, it will be liable for the difference in compensation for temporary incapacity and pensions, and hospital and medical care costs in proportion. Therefore, in this case, the employer’s liability is deemed to be a complement to the insurer’s liability, as stated in article 79 of the RRRATDP. If the accident was caused by the employer, its agent or an entity it has contracted, a user of the workforce, or by not complying with regulations on health and safety in the workforce, the insurer covers the risks and compensates the employee affected. However, in this situation the insurer may make a claim against the employer, as stated in articles 18 and 79 of the RRRATDP. If an employer becomes aware of an accident it is obliged to inform the insurer within 24 hours. If it does not do so, it may be liable for all losses and damages. An occupational accident is one which occurs in the workplace during work time and causes direct or indirect loss, functional disorder or illness leading to reduced working or earning capacity, or death. The right to compensation includes payment of medical, surgical, pharmaceutical, hospital and any other services, in any form whatsoever, when necessary and appropriate for restoring health and the capacity to work, as well as allowances and pensions. There is a standard policy drawn up by the Institute of Insurance in Portugal, which defines the guidelines of policies entered into by insurers and insured parties. This policy establishes that the premium will be variable in accordance with the number of employees, that is, if the employer increases the number of employees, it must inform the insurer of this fact, which will lead to a premium increase; this is called a variable premium. If the employer does not provide correct information on the number of employees and their salaries, it may face administrative sanctions and be ordered to pay €630 to €9975, the value of which depends on the turnover and the existence of intent or negligence, as stated in article 554 no. 3 of the Labour Code ex vi Article 171 RRRATDP. Liability due to a breach of administrative regulations does not
prejudice legal and/or criminal liability. The employer only transfers
objective liability to the insurer; that is, from damages that are imputed
on him regardless of whether he has been found negligent. However, it does
not transfer subjective liability, that is, liability arising from
negligence. In the case of article 18 of the RRRATDP, if the damage
results from non-compliance with health and safety in the workplace
regulations that the employer must oversee and implement, then the
increased compensation will be borne by the employer and legal liability
proceedings may be brought against the employer. 
Argentina Introduction In 1995, the Law regarding Occupational Risks No. 24.557 (“LRT”) was approved—recently modified by Decree No. 1694/2009--through which the system of Occupational Risks was created, with the objective of preventing risks and compensating damages resulting from working practices. In this sense, and in accordance with the regime regulated by the LRT, employers must choose either to be affiliated compulsorily to the Occupational Risk Insurers (“ART”) that they freely choose, or self-insure themselves. ARTs are entities governed by private law, authorised by the Superintendencia de Seguros de la Nación (“SSN” – national insurance watchdog). Employers which opt to be affiliated to an ART must declare employees who enter and leave the workforce and ARTs may not reject affiliation by any employer included in its scope of action. In this sense, if an employer not included in the self-insurance regime fails to join an ART, it shall be directly liable before any beneficiaries for the benefits stipulated in the LRT. Likewise, if the employer fails to declare its obligation to pay or the hiring of an employee, the ART will award the benefits and may then make a claim against the employer for the cost thereof. Compulsory insurance and self-insurance Employers may protect themselves against the risk of occupational accidents and illness by taking out compulsory insurance regulated by the LRT or may self-insure. Employers may self-insure when they can prove economic-financial solvency and guarantee the services to award the benefits established in the LRT. Prevention of occupational risks The LRT establishes an obligation to adopt measures planned to effectively prevent occupational risks. If occupational illness occurs as a result of the employer failing to comply with health and safety in the workplace regulations, the LRT establishes the possible application of financial penalties which will be fixed by the Superintendencia de Riesgos del Trabajo (SRT) in its role as supervisory body. Eventualities and situations covered Eventualities covered by the LRT are considered to be:
Benefits The LRT establishes the benefits that the ARTs will award to an employee who is a victim of any of the occupational eventualities covered. The LRT’s benefits are divided into those paid in cash and those given in kind or in services. Benefits in kind are those that the employee requires for psychological and physical recovery. Cash benefits are those paid to make up for the total or partial loss of income, or the sums paid as compensation to make up financially for the damages sustained by the victim. Employers' legal liability The LRT benefits payable exempt employers from any legal liability before their employees and the successors thereof, except for cases falling under Art. 1072 of the Civil Code, that is, wilful misconduct by the employer. In such event, the victim or his or her successors may claim compensation for the damages and loss in accordance with the provisions of the Civil Code, without prejudice to the victim retaining the entitlement to LRT benefits borne by the ART or self-insured employers. Without prejudice to the provisions of the LRT, in several precedents the Supreme Court has declared unconstitutional the article of the LRT limiting the legal liability of the employer as set out above, and effectively exposing employers and ARTs to more onerous compensation. Conclusion The system established by the LRT has been questioned by the Supreme Court which have almost led the system to crisis, generating additional costs for employers and ARTs. In general, the arguments have concerned the quality and scope of
services and the insufficient cash benefits. The industry is carefully
observing the judicial response to last reform implemented in 2009, which
aimed to solve some of the issues formerly raised. 
Bolivia In Bolivia, employer’s liability is established by the General Law on Employment, which states that any company or establishment of work is required to pay the employees, employees or apprentices it employs the compensation stipulated for occupational accidents or illnesses occurring as a result of work, whether or not it or the employee was culpable or negligent. This obligation is valid even if an employee is employed under the dependence of a contractor deemed as employer for operation of the business, unless stipulated to the contrary. Within the provisions of common law, accidents resulting from the following causes are excluded:
An occupational accident is defined as any traumatic injury or functional alteration, whether permanent or temporary, immediate or later, or death caused by a force inherent to the work under the previously established conditions. Occupational illnesses are all of those resulting from work and representing organic injuries or functional disorders, whether permanent or temporary. Occupational illness must be declared to be exclusively the result of employment and have been contracted during the year prior to the appearance of the incapacity it has caused. Compensation for accidents is only paid when the victim provided services in the company for at least 14 days prior to the accident and the incapacity to work exceeds six days. The employer is required to inform the Department of Employment or closest political authority within 24 hours of occurrence. With respect to occupational illnesses, the victim or other person shall inform the employer, so that the latter can inform the indicated authority. If this notification is not given, the compensation shall be calculated taking into account the class, grade and duration that the incapacity would have had if medical or pharmaceutical care had been provided at the opportune time. If the police authorities receive these notifications they shall give detailed information on the case to the Department of Employment. If no salary had been agreed, the compensation will be calculated on the basis of the national minimum salary, currently less than $US 100. There is no experience in connection with surcharges for behaviour that may be considered as increasing workplace risk, nor penalties which favour the victim applied to set examples. If a breach of industrial safety regulations by the employee is demonstrated, administrative fines are applied which go to the Ministry of Employment. Evidently, legal liability proceedings can be brought against the employer but in our nation-wide experience, the compensation claimed rarely goes beyond of that stipulated by the Employment Law. It is not necessary to prove culpability or negligence as Bolivian legislation considers legal liability from the objective point of view, that is, as an extra-contractual obligation arising from the risk of the activity itself. These risks are insured under two modalities: those called short-term risks, which are medical care and compensation for partial incapacity for a determined time, are covered by compulsory social security under the responsibility of various social security management entities. Permanent partial incapacity or permanent total incapacity are long-term risks covered by the Administrators of Pension Funds, called AFPs. Long-term insurance is managed by the AFPs which manage the eventualities of Disability, Old Age and Death and the insurance which is originally short-term, such as occupational risks, which becomes long-term insurance when the situations persist and become permanent. Affiliation to this insurance has the following features:
Long-term insurance includes: retirement, disability and death by common risk, professional risk, occupational risk and funeral costs. The third party victim or his or her successors, in the case of absence, flight, impediment or death of the insured party, brings action against the insurer as beneficiary of the compensation from the time when the insured party’s liability originates. In the event of death, his or her heirs shall receive the appropriate compensation. In conclusion, it can be said that in Bolivia employer’s legal liability is established, but cover has been sought through compulsory company insurance. If the employer does not take out said insurance, it shall be required to bear the costs and compensation due out of its own assets. However, in the market the insurance companies offer employer’s legal liability policies which apply in excess of the provisions of the General Employment Law, but do not generally include occupational illnesses. Furthermore, companies have opted to take out private medical and personal accident insurance for their employees, covering medical costs and compensation. This personal accident cover is evidently different from that of employer’s legal liability, however, in fact, if the employee’s medical costs are covered and he or she can receive compensation subsequent to an accident, the employer is likely to be free of further claims. Knowing this, when taking out a personal accident policy for its employees, the employer is insuring its own legal liability. Reasons why certain companies have taken the option of taking out additional personal accident insurance include: access to better health services, better cover for all personnel, including those who have not formalised their employment relationship, that is, temporary personnel or those hired for a certain task, who are not necessarily covered by social security. Personal accident cover also normally covers all types of accident, occurring 24 hours a day, not only during work, which is the case for social security or employer’s legal liability policies. This being the case, employers increasingly understand that taking out additional private insurance not only insures their assets against potential losses due to legal liability, but also provides a higher level of care for their personnel. 
Brasil In Brazil, employers are liable for damages caused by their own fault (at-fault liability) and under their responsibility regardless a fault (strict liability). In general, a party that committed the fault (an unlawful or illicit act, brought about with negligence, imprudence or malpractice) is responsible to indemnify the losses that arise from it. Such liability is known as ‘at-fault liability’. In spite of at-fault liability being the rule, Brazilian law sets forth some exceptions, where a person or entity is liable to indemnify losses that arise from somebody else’s fault, that is to be considered as under the person or entity’s responsibility. Such liability is known as ‘strict liability’. This liability derives from situations in which the agent is by law presumed as acting on behalf of the so called responsible (e.g. employer), or whenever a certain activity involves an inherent social/environmental elevated risk factor that is by law considered as a burden to be supported by the corresponding entrepreneur despite any demonstration of its direct fault. Examples of strict liability are the employers’ liability to indemnify damages: (i) that arise from faults of their employees’, in case such faults were committed in the performance of those employees’ services or as a direct result of the services they provide. For instance, in case there is a traffic accident caused by a professional driver, his employer would respond before third parties, for the damages resulting from that accident. The employer would, furthermore, possibly be found responsible for damages inflicted to the professional driver by the traffic accident the latter caused as this accident is considered an on-the-job accident. Under Brazilian law, indemnification shall redress only the direct and immediate damages incurred. The damages, subject to indemnification, may comprise of:
Please note that there is no legal provision regulating or supporting the existence of punitive and consequential (indirect) damages under Brazilian Law. In addition to the liability to redress damages, employers may be subject to administrative fines or Court awards rendered in individual or collective labor claims in case they do not comply with labor and social security obligations. In Brazil, some of the damages to employees are covered by the Public Social Security System (INSS) and by regular health insurance policies most employers’ hire, specially the ones related to ‘on-the-job’ accident or work-related diseases. Nevertheless, such coverage does not release the employer from its obligation to indemnify employees for damages in excess to those covered by the INSS or by health insurance hired by the employer. In view of that, employers may also take out insurance coverage to the above briefed liabilities. Such insurance coverage is not a standalone product, but comes as an extension to the other insurance policies such as Premises Liability Insurance (“Seguro de Responsabilidade Civil de Estabelecimentos Industriais ou Comerciais”) and Operational Insurance. In general, the insurance offers coverage to employer liabilities that
are related to damages caused by third-parties (including employees) in
connection with the employer’s business which includes damages caused by
employees in connection with the services they perform or as a direct
result of them.
Colombia In Colombia, employers are responsible for the health and safety of their employees, in relation to their work and in principle they are responsible for compensating them in the event they suffer an occupational accident or illness. An occupational accident and/or illness should be understood as any which affects the employee’s health resulting from the work they undertake, whether external (occupational accident) or internal (occupational illness). With respect to compensation, Colombian law has established tables with the values for compensation for the different events that may give rise thereto. In theory, these tables determine the value of the compensation that must be paid to the employee when an occupational accident or illness occurs. Despite the foregoing, in the event that an occupational accident or illness occurs as a result of negligent behaviour by the employer, an employee may claim full compensation for losses, which may be higher than determined by the law, as it will include all losses sustained that the employee can demonstrate, including components such as psychological damages, not normally included in full in the compensation tables. In accordance with current legislation (Law 100 of 1993 and complementary regulations) all employers are obliged to have their employees affiliated with the Social Security System for occupational risks. This is an insurance system which covers the occurrence of occupational accidents and illnesses in employees. In acquiring this insurance, the employer transfers the risk of occurrence of occupational accidents or illness to private insurance companies called Administradoras de Riesgos Profesionales (ARPs – occupational risk management companies). In this way, once the employee is included in the system, although the employer is responsible for the health and safety of its employees, it is the ARP which must pay the compensation. If an incident occurs, an employee can take action against the employer directly or against the ARP. However, if action is taken against the employer, the latter may joinder ARP to the proceedings as insurer and this party shall, in principle, be responsible for paying the compensation. However, when the incident is caused by grossly negligent or intentional behaviour by the employer, the ARP can pay the compensation to the employee and then take action against the employer, or refuse to pay the compensation. In this event, an employee can take legal action directly against the employer, claiming payment due to its responsibility for his or her occupational health. It is worth clarifying that it is expressly stipulated by law that this type of claim falls under an employment jurisdiction, and therefore it is not possible for the employee to take civil action against the employer, as there is a specific process for these, where all losses sustained can be claimed. However, the employer may be legally liable vis-à-vis third parties for the losses sustained by such third parties as a result of the occupational illness or accident suffered by the employee. As an example, an employer may be liable for the psychological damage caused to the children of an employee who has suffered an occupational accident, preventing him or her from interacting with them in the same manner as previously. With respect to the penalties for an employer who acts with negligence, in addition to the facility of claiming full compensation for the losses as stated above, these basically consist of an increase in the risk classification of the company by the ARP, and therefore an increase in the value of the premium to be paid. Regardless of who pays the compensation (ARP or employer) it is
important to take into consideration that in Colombia there are no
punitive damages or penalties for employers involving the payment to
employees of higher sums that the losses effectively sustained. 
Costa Rica Occupational risk coverage is based on the constitutional principle of protection of employees as a right of the individual and obligation to society. For the benefit of all employees, it was declared that occupational risk insurance is compulsory and universal. An employer who does not insure its employees shall be responsible for the medical and health benefits paid by the insuring entity, as the latter always compensates the employee regardless of whether or not there is insurance for the employee; the insuring entity later collects the sum from the employer. In this sense, any employer’s liability shall be protected by compulsory insurance regardless of the liability of the employer. If there is a poor occupational health policy (precarious working environment, inexistence of suitable equipment, etc.), the insurer is limited to collecting the cost of the insurance but may not exclude any incident from cover if the policy is valid, premiums are paid and there is a due mention of the employee on the payroll. It is important to clarify that currently the compulsory occupational risks insurance is under the monopoly of the Instituto Nacional de Seguros (state insurer) but which pursuant to the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), it was agreed that from 2011 compulsory insurance (vehicles and occupational accidents) would be opened to be sold by any private insurance entity. This subject is relevant due to the fact that private entities will be able to move into this type of insurance. In general terms, compensation is paid for medical and health services, rehabilitation and cash benefits, specifically:
With respect to surcharges for certain behaviour, the regulations determine a surcharge in the event that of failure to adopt any of the determined preventative measures or concerning occupational health; a surcharge shall also apply to an increase in the claim rate on a policy. In Costa Rica there is no legislation concerning exemplary penalties or
damages, and this concept does not apply.
As it is not a voluntary legal liability insurance but a compulsory protection scheme, the employee or successors are fully entitled to claim the respective compensation directly from the insurance entity. The insurance entity, if there is no valid policy, shall be subsequently entitled to recover from the employer all sums paid to the employee. 
Mexico The employers’ liability discussed here is that which employers may incur vis-à-vis their employees for the occurrence of damage or injuries due to occupational risks and accidents. In Mexico, employers’ liability is handled separately from the civil liability regime. For regulation of workplace relations and liabilities a special jurisdiction applies, that of labour laws, constituted basically by Article 123 of the Political Constitution of the United Mexican States, the Federal Employment Law, the Social Insurance Law, the Law on the Social Security and Services of State Employees Institute and various employment regulations. Employer’s liability is regulated by these legal provisions, which are federal and therefore compliance with them is compulsory in the whole country. The civil legislation contained in the thirty-two civil codes corresponding to each of the states of the federation, including Distrito Federal where the capital city is located, and in the Federal Civil Code, does not apply to employer’s liability as in all cases the provisions of the Federal Employment Law apply for cases of occupational risks and hazards. Some of these civil codes now no longer even mention the employment contract, and those which do through old references, such as the Federal Civil Code, in such case refer to the application of the Federal Employment Law. In Mexico, employers’ liability for occupational accidents suffered by their employees is governed by the Federal Employment Law, the Law on Social Insurance that applies to the compulsory social security regime for employers and employees in the private sector and by the Law on the State Employees’ Social Security and Services Institute, which applies to the compulsory social security regime for employees in the public sector. In accordance with the Federal Employment Law, employers are required to comply with health and safety provisions aimed at preventing accidents and illnesses in workplaces and in places where work is performed. They must also at all time supply the medications and treatment materials required so that first aid can be opportunely and effectively dispensed. Employers are also required to visibly display and distribute in places where work is carried out the provisions arising from the health and safety instructions and regulations and to immediately inform the competent authority when any accident occurs. Occupational risks may lead to temporary incapacity, partial or total permanent incapacity or death. The sum of compensation is determined in accordance with the specifications contained in detail in the Federal Employment Law, and based on the incapacity reports issued by the health departments of the Mexican Institute of Social Insurance or the State Employees’ Social Security and Services Institute as applicable. Employers in the private sector are relieved of their employer's liability for occupational risks if they fulfil their obligation to insure their employees with the Mexican Institute of Social Insurance, as stipulated by the Law on Social Insurance. Pursuant thereto, this condition being fulfilled, civil liability proceedings exercised directly against them for damages caused to its employees through the realisation of occupational risks will be stayed. For its part, the State is relieved of its employer’s obligations, as through the provisions of the State Employees’ Social Security and Services Institute, this liability has been subrogated to the charge of said Institute, and therefore civil liability actions for occupational accidents brought against the state will not be allowed to continue, either. In Mexico the laws do not stipulate any penalties to make an example of employers which fail to fulfil their obligations. However, if the faults committed by the employers are classified as inexcusable negligence, the Federal Employment Law states that the sum of compensation resulting therefrom be increased by up to twenty-five percent. Inexcusable negligence by the employer is characterised when the legal provisions established for the prevention of occupational risks are not fulfilled, when suitable measures are not adopted to avoid repeating accidents that have previously occurred. If the accident prevention measures recommended by employers’ committees, employees or labour authorities are not adopted, or if having seen the risk employees run, it does not adopt adequate measures to prevent them, and in general when it acts negligently with respect to the dangers occupational risks entail for its employees. Precisely due to the prevailing legal context, described briefly here, in Mexico cover for employer’s legal liability risks is not used or offered on the insurance market. The general civil liability insurance policies issued in Mexico
invariably exclude from their cover liabilities related to the Federal
Employment Law, the Law on Social Insurance or any other provision
complementing these laws. They only cover the risks of persons working as
domestic employees, who are protected against accidents which may occur in
the house where they work, in the same way as owners, inhabitants and
visitors. 
Peru In Peru, the issue of the Law on Modernisation of Social Security in Health (Law 26790) of 17 May 1997 modified the legal regime of compulsory insurance concerning occupational accidents, creating what is called Complementary Risk Insurance, in order to move towards making the system universal. In doing so, it sought to extend the scope of application of compulsory insurance, including not only manual employees but also employees of companies that practise risky activities. The scope of application of the compulsory insurance is however currently restricted to companies that practise activities considered as being risky. A list of these activities has been drawn up in the regulations. The insurance is called complementary insofar as dependent employees form part of the social security system. The regulations do not establish that payment of the compensations established herein eliminates the employer’s liability for the damages suffered by the employee. Pursuant thereto, it is possible that the employee or their heirs may bring a compensation claim against the employer in order to obtain additional compensation to that received through the insurance. The complementary risk insurance provides health cover for high risk work and cover for disability and interment. In the event of serious negligence by the employer, the regulations authorise the insurer to bring a claim against the latter for the sums it has had to pay in benefits awarded to the employee. There are various sector-specific regulations (for example, in mining or electricity) which establish serious penalties when an occupational accident occurs and it is discovered that the employer failed to comply with the health and safety obligations established in the relevant sector-specific regulation. Direct action can be taken against an employer which has failed to take out complementary risk insurance. In general, the judiciary has awarded compensation to employees who have suffered occupational accidents, in addition to the sums received through the insurance, when it is possible to attribute some level of negligence to the employer. Whilst complementary risk insurance is compulsory for the high risk activities listed in the regulation, it is nevertheless possible to take out this insurance even if not required to do so. Employers’ liability insurance can also be found in the local market. The health cover of complementary risk insurance may be taken out with the Instituto Peruano de Seguridad Social (public social security entity) or with any duly authorised health provision company (private entities). Disability and interment cover may be taken out with the Oficina Nacional Previsional (public entity) or with any of the insurance companies authorised to offer this type of cover in the country by the Superintendencia de Banca, Seguros y AFP (banking, insurance and pensions watchdog). Insured parties can take direct action against insurers for incidents covered by the complementary risk insurance. These disputes are resolved through arbitration, with state intervention. Cover of occupational illnesses forms part of the cover provided by the
complementary risk insurance. 
Venezuela The laws governing social security (public system) in Venezuela are essentially the Organic Law on Employment, the Organic Law on the Social Security System, the Law on Social Insurance and the Organic Law on Prevention Conditions and Environment in the Workplace (LOPCYMAT). These laws lay down regulations relating to occupational accidents and illnesses. In theory, if an employer fulfils all legal obligations, social security will assume the risk. However, if the occupational accident or illness is a result of breach of the legal regulations by the employer, it is required to pay compensation. This compensation is independent of the existence of private insurance. In practice, social security tries to unload liability onto employers, as the Social Security officers responsible for assessing the existence or occurrence of an occupational accident or illness, in many cases, probably the majority, consider that they are occupational in origin, without carrying out a correct assessment of the case and the pathology of the employee. For this reason, when an accident occurs, the Social Security tries to transfer the costs of the risk to the employer. An employer may be ordered to pay compensation for:
There may be surcharges, depending on the gravity of the damage. The compensation levels set out in the LOPCYMAT are graduated, and there are minimum and maximum levels. Social Security personnel are responsible for determining such level. Compensation for punitive damages is a concept foreign to Venezuelan law. However, the judges and employment authorities may use the greatest discretion to establish the quantum of damage, in particular for psychological damage. Some employers take out insurance to cover compensation which they may be required to pay to employees for occupational accidents. Normally, the policies are on “pay to be paid basis”—they cover the employer after it has compensated the employee, so there are no direct actions by the employee against the insurance company. There may be problems with policies in which negligence or culpability by the employer is involved. Some companies insure employees directly, in which case there is a direct relation between the employee and the insurance company. In theory, for occupational illnesses and accidents, Social Security insurance (in the regions where it exists) covers compensation for medical costs. In the areas where Social Security insurance does not exist, the employer is made liable. However, in practice, on many occasions, Social Security insurance does not fulfil its duties satisfactorily. Employers (even though not required by law) take out HCM insurance (Hospitalisation, Surgery and Maternity), of which the direct beneficiaries are the employees. This insurance covers medical costs. Although the employer is responsible for the processing the claim with the insurance company, the employees appear as direct beneficiaries of the policies. With respect to occupational accidents and compensation relating thereto, in additional to any criminal liability of the employer, the employer’s may also be subject to civil liability extending to psychological damage (which is an objective liability), consequential damage and loss of earnings (in cases of negligence by the employer). In many circumstances employers take out civil liability insurance through which the insurance reimburses the employer after it compensates the employee who has been victim of an accident. Although in principle the LOPCYMAT stipulates the creation of a fund
for protection of employees in occupational accidents, this fund has yet
to be set up. In practice, it is employers who are directly liable for
occupational accidents. The problem for employers is aggravated when the
cause of the accident is the culpability of serious negligence of the
employer, as in these cases private legal liability insurance does not
normally cover the employee’s liability. |
Key ContactsNick Thomas
Jesus Velez
Alex Guillamont
Kennedys advises in Iberian and Latin American insurance /reinsurance matters from its following offices: 25 Fenchurch Avenue, London, EC3M 5AD, UK. Tel:+44 020 7667 9667 Paseo de la Castellana nº 50, 28046 - Madrid, Spain. Tel: +34 91 523 7210 If you would like further information go to our website If your email address has changed or you would like to update your contact details, please click here To unsubscribe from this email please click here To unsubscribe from all emails please click here To read our Privacy Policy, please click here
|
| Privacy statement | Disclaimer | Copyright | |
