You can still pursue a personal injury claim against a company that has ceased trading, or is in administration or liquidation, but the process may be more complex and time-consuming. Success depends on factors such as the availability of insurance coverage and the company’s financial status at the time of the incident.
Key Takeaways
- Claims against defunct companies are possible but may be challenging
- Insurance coverage is crucial for successful claims
- Time limits still apply, even for companies no longer trading
- Different strategies exist for companies in administration vs. those completely closed
- Professional legal advice is essential in these complex cases
Here we explore the challenges, possibilities, and strategies for pursuing claims against companies that are no longer operational or are facing financial difficulties.
Understanding Company Status
When pursuing a claim against a company, it’s important to know its current status. Companies can be in various states of operation or closure, each with different implications for your claim.
A company that has ceased trading has stopped all business operations. This could be due to:
- Voluntary closure
- Bankruptcy
- Forced closure by authorities
Ceased trading doesn’t necessarily mean the company no longer exists legally, which can affect how you approach your claim.
A company in administration is still legally active but under the control of an appointed administrator. This status is often a step towards either:
- Restructuring and continuing operations
- Orderly winding down of the business
During administration, the company is protected from legal action by creditors, which can complicate the claims process.
Liquidation is the process of bringing a company’s existence to an end. There are two main types of liquidation:
1. Voluntary Liquidation
- Initiated by the company’s directors or shareholders
- Can be solvent (where the company can pay all its debts) or insolvent
2. Compulsory Liquidation
- Forced by creditors through a court order
- Always involves an insolvent company
Key points about liquidation
- Appointed Liquidator: A licensed insolvency practitioner is appointed to manage the liquidation process.
- Asset Realisation: The liquidator’s primary role is to sell the company’s assets and distribute proceeds to creditors.
- Creditor Hierarchy: There’s a strict order in which creditors are paid, with secured creditors typically having priority.
- Legal Entity: The company continues to exist as a legal entity during liquidation but ceases to trade.
- Time-Limited: The liquidation process has a definite end, after which the company is dissolved.
Implications for claims
- Automatic Stay: Like administration, liquidation usually imposes a stay on legal proceedings against the company.
- Claim Submission: You may need to submit your claim to the liquidator as a creditor.
- Reduced Prospects: The chances of receiving full compensation are often lower in liquidation cases, especially for unsecured creditors.
- Insurance Focus: For personal injury claims, the focus often shifts to finding and claiming against the company’s insurance policies.
Whether a company has ceased trading, is in administration, or is undergoing liquidation will determine the best approach to your claim. Each status presents different challenges and requires specific strategies to maximise your chances of successful compensation.
The Importance of Liability Insurance
Liability insurance plays a pivotal role in personal injury claims, especially when dealing with companies no longer in business. It is designed to protect businesses from financial losses due to liabilities arising from injuries to third parties. In the context of personal injury claims, there are two main types of liability insurance that are particularly relevant:
Employer’s Liability Insurance
Employer’s Liability Insurance is a legal requirement for most businesses in the UK that employ staff. This insurance is designed to cover claims made by employees who have been injured or become ill as a result of their work. Key points about Employer’s Liability Insurance include:
- Legal Requirement: Companies must have at least £5 million of cover, though most policies provide £10 million or more.
- Continuous Coverage: Even if a company ceases trading, the insurance policy that was in place at the time of the incident remains valid for claims.
- Certificate Display: Companies are required to display their insurance certificate, which can be helpful in tracing the insurer.
- Penalties for Non-Compliance: Businesses can face significant fines for each day they operate without proper coverage.
The existence of this mandatory insurance means that even if a company has gone out of business, there’s often still a route to compensation for employees injured at work.
Public Liability Insurance
While not legally required, Public Liability Insurance is widely held by businesses. This insurance covers claims made by members of the public for injuries or damages occurring on the business premises or as a result of the business’s activities. Important aspects of Public Liability Insurance include:
- Voluntary but Common: Many businesses choose to have this insurance to protect themselves from potentially costly claims.
- Coverage Scope: It typically covers injuries, property damage, and legal costs associated with defending claims.
- Varied Policy Limits: The amount of coverage can vary significantly between businesses.
- Relevance Post-Closure: Like Employer’s Liability Insurance, these policies can still be claimed against even after a business closes.
For claimants, the existence of Public Liability Insurance can be critical to securing compensation, especially when the business itself no longer has assets.
The Long-Tail Nature of Liability Insurance
One of the most important aspects of liability insurance in the context of defunct companies is its “long-tail” nature. This means that the insurance coverage is based on when the incident occurred, not when the claim is made. Key points include:
- Claims Made Years Later: It’s possible to make a claim on a policy that was in force at the time of the incident, even if the claim is made years later.
- Importance in Industrial Disease Cases: This is particularly relevant for industrial disease claims, where symptoms may not appear until long after exposure.
- Tracing Historical Policies: In some cases, it may be necessary to trace insurance policies from decades ago, which can be challenging but is often possible with professional help.
The Role of Insurance in the Claims Process
When a company has ceased trading or is in administration, their liability insurance often becomes the primary (and sometimes only) source of compensation for claimants. The process typically involves:
- Identifying the Correct Insurer: This may involve using services like the Employers’ Liability Tracing Office (ELTO) or conducting extensive searches.
- Notifying the Insurer: Once identified, the insurer must be formally notified of the claim.
- Dealing Directly with Insurers: In many cases, the claim process will proceed directly with the insurance company rather than the defunct business.
- Potential for Full Compensation: Unlike claims against insolvent companies without insurance, claims against insurance policies have the potential for full compensation, subject to policy limits.
Strategies for Claiming Against Defunct Companies
When pursuing a compensation claim against a company that has ceased trading or is in administration or liquidation, several strategies can be employed. Each approach has its own challenges and potential outcomes, and the best strategy often depends on the specific circumstances of the case.
The most effective strategy is often to locate and claim against the company’s insurance policy. This process can be complex but is often crucial for successful claims.
Using the Employers’ Liability Tracing Office (ELTO)
- Purpose: ELTO maintains a database of employers’ liability insurance policies.
- Process: Submit a search request with details of your employment and the company.
- Success Rate: High for recent policies, but can be challenging for older cases.
- Limitations: Only covers employers’ liability insurance, not public liability.
Consulting the Financial Conduct Authority (FCA) Register
- Function: The FCA register can provide information on insurance companies and brokers.
- Usefulness: Can help identify which insurers a company might have used.
- Process: Search the register online using the company’s details.
- Limitations: Doesn’t directly provide policy information but can guide further inquiries.
Engaging a Specialised Solicitor
- Expertise: Solicitors experienced in this area often have additional resources and methods for tracing policies.
- Networks: They may have contacts in the insurance industry that can assist in searches.
- Legal Strategies: Can advise on alternative approaches if insurance can’t be traced.
- Cost Consideration: While there’s a cost involved, it can significantly increase the chances of a successful claim.
In some cases, it may be possible to pursue a claim against the company directors personally.
Unincorporated Businesses
- Liability: Owners of sole trader businesses or partnerships can be personally liable for business debts.
- Process: Claims can be made directly against the individual(s) who owned the business.
- Challenges: Success depends on the individual’s ability to pay.
Limited Companies
- Limited Liability: Directors are usually protected from personal liability for company debts.
- Exceptions: Personal claims may be possible in cases of fraudulent or wrongful trading.
- Legal Complexities: Proving fraudulent or wrongful trading can be challenging and often requires specialist legal advice.
Piercing the Corporate Veil
- Concept: In rare cases, courts may ‘lift the corporate veil’ to hold directors personally responsible.
- Circumstances: Typically involves serious misconduct or abuse of the corporate structure.
- Legal Expertise: Requires skilled legal representation and strong evidence.
When a company is in administration, there’s still a legal entity to claim against, but the process is different.
Contacting the Administrator
- First Step: Identify and contact the appointed administrator.
- Information Gathering: The administrator can provide details on the company’s status and assets.
- Claim Submission: Submit your claim to the administrator as a creditor.
Understanding the Creditor Hierarchy
- Priority Order: Understand where your claim sits in the order of creditors.
- Secured vs. Unsecured: Personal injury claims are usually unsecured and lower in priority.
- Partial Payment: Be prepared for the possibility of receiving only a portion of your claim.
Negotiating with the Administrator
- Proactive Approach: Engage with the administrator to understand the likelihood of payment.
- Evidence: Provide clear evidence of your claim to strengthen your position.
- Timely Action: Act quickly, as administration processes can move fast.
In some cases, it may be possible to pursue a claim against parties related to the defunct company.
Parent Companies
- Corporate Structure: Investigate if the defunct company was part of a larger corporate group.
- Vicarious Liability: In some cases, parent companies can be held responsible for subsidiaries.
- Legal Precedent: Recent court decisions have expanded the potential for parent company liability.
Contractors or Site Owners
- Shared Responsibility: In workplace accidents, other parties present on the site might share liability.
- Occupiers’ Liability: Property owners may be liable for accidents on their premises.
- Chain of Responsibility: Explore the entire chain of command and responsibility related to your accident.
In certain circumstances, government schemes may provide compensation when other avenues are exhausted.
Financial Services Compensation Scheme (FSCS)
- Purpose: The FSCS provides compensation if the insurer has also become insolvent.
- Scope: Covers both compulsory and certain non-compulsory insurance policies.
- Process: Has its own claim procedure, often requiring proof that other avenues have been explored.
Criminal Injuries Compensation Authority (CICA)
- Applicability: CICA is for injuries resulting from violent crimes, including in workplace settings.
- Last Resort: Can be an option if the company and its insurers cannot be traced or are insolvent.
- Limitations: Has specific criteria and typically lower compensation amounts than civil claims.
Each of these strategies requires careful consideration and often professional legal guidance. The most appropriate approach will depend on the specific circumstances of the case, the nature of the injury, and the status of the defunct company. A combination of these strategies may be necessary to maximise the chances of a successful claim.
Challenges in Claiming Against Defunct Companies
If you make an injury claim against a company that has – or will – shut down, it may still be worth it. However, it is not likely to be a simple process or a speedy one, and finding a solicitor to pursue the claim on a conditional fee basis could prove very difficult.
Companies who no longer trade have no active staff, therefore requests for information will not be answered and therefore finding out who their insurers were and whether they had cover may be impossible. Most companies are limited companies and this means that if the company is closed, you cannot claim against the business owners or directors as they are not personally responsible for the losses or costs of a business.
Whilst the right to claim remains, the prospects of success are likely to be smaller than otherwise for reasons such as:
- Difficulty in obtaining evidence
- Potential loss of witness testimony
- Complications in serving legal documents
- Reduced likelihood of full compensation
If insurance was in place before a company went in to administration and the costs of the insurance had been paid, the policy would remain effective and a claim could still stand. However, the excess cost would then become an issue.
With employee liability insurance, it is common for excess amounts to range from £1000 right up to 5-figure sums. With this in mind, if an administrator confirms a high excess, it could mean that the amount of money the excess forms would be higher than the value of the claim that you may make. As the administrator will not be able to pay the excess for any claim to be made, the claimant can opt to sacrifice the excess from their claim value and then retain the balance.
This can work fine if the value of a claim substantially outweighs the excess amount. For example, if you had a claim that had a value of £10,000 in compensation, but the excess was only £1000, it would still be worth claiming as you would then stand to receive £9,000 before your legal costs were deducted, leaving you with £6,750 in settlement. Whilst this may seem unfair (and it is!) it is better than having nothing.
However, if your claim settlement was worth £1,000 and the excess was also £1,000 it would not be worth pursuing the claim, unless you really wanted to prove a point. It is also unlikely that a solicitor would continue to pursue the claim on a conditional fee agreement basis.
Special Considerations for Different Claim Types
The nature of your claim can significantly impact the approach and potential outcomes. Different types of claims present unique challenges and opportunities, requiring tailored strategies.
When you’ve suffered an injury in an accident at work due to a company’s negligence, discovering that the business has ceased trading or entered administration can be disheartening. However, this, and even if you left the company, doesn’t necessarily mean the end of your compensation claim. Workplace injury claims are among the most common when dealing with defunct companies, and they come with specific considerations:
Tracing Employer’s Liability Insurance
- Mandatory Coverage: Employer’s Liability Insurance is legally required, increasing the chances of finding a valid policy.
- ELTO Database: Utilise the Employers’ Liability Tracing Office to search for historical policies.
- Long-Tail Policies: These policies often cover claims made years after the company has ceased trading.
Multiple Employer Scenarios
- Shared Liability: In cases where multiple employers were involved, you may be able to claim against other, still-operating companies.
- Proportional Liability: Courts may apportion liability among different employers based on exposure or risk.
Occupational Health Records
- Importance of Documentation: Medical records and occupational health assessments can be crucial evidence.
- Historical Data: For long-term conditions, gather as much historical health data as possible to establish causation.
Consideration of Parent Companies
- Extended Liability: Recent legal precedents have expanded the potential liability of parent companies for subsidiaries’ workplace safety.
- Due Diligence: Investigate the corporate structure at the time of your employment to identify potential alternative defendants.
Industrial disease claims present unique challenges due to their often long-term nature:
Long Latency Periods
- Delayed Onset: Many industrial diseases manifest years or decades after exposure, complicating claims against now-defunct companies.
- Historical Evidence: Gather employment records, witness statements, and historical data about workplace conditions.
Multiple Employer Liability
- Cumulative Exposure: Industrial diseases often result from exposure over time, potentially involving multiple employers.
- Apportionment of Liability: Courts may divide liability among various employers based on the duration and intensity of exposure.
Mesothelioma Cases
- Special Provisions: Due to the severity and specific nature of mesothelioma, there are special legal provisions for these claims.
- Government Compensation Schemes: Explore options like the Diffuse Mesothelioma Payment Scheme for cases where employers or insurers cannot be traced.
Burden of Proof
- Balance of Probabilities: Claimants need to show that workplace exposure was likely the cause of their condition.
- Expert Testimony: Medical and occupational experts play a crucial role in establishing causation.
Public liability claims against defunct companies can be more challenging but are not impossible:
Insurance Tracing Challenges
- Non-Mandatory Nature: Unlike Employer’s Liability Insurance, Public Liability Insurance is not legally required, making policy tracing more difficult.
- Alternative Search Methods: Utilise industry databases, historical business records, and specialist tracing services.
Property Owner Liability
- Occupier’s Liability: In cases of accidents on business premises, the property owner (if different from the business) may be liable.
- Historical Ownership Records: Research property ownership at the time of the incident, as this may provide an alternative route for your claim.
Local Authority Involvement
- Public Spaces: For incidents in public areas, local authorities may share liability.
- Maintenance Records: Obtain records of area maintenance and reported hazards to strengthen your case.
Consumer Protection Angle
- Product Liability: For injuries caused by defective products, you may have a claim even if the manufacturer has ceased trading.
- Supply Chain Investigation: Explore the entire supply chain to identify other potentially liable parties.
For road traffic accidents involving now-defunct companies, consider:
Motor Insurers’ Bureau (MIB)
- Uninsured Drivers: If the defunct company’s vehicle was uninsured, the MIB may handle the claim.
- Last Resort: The MIB acts as a last resort for compensation in cases where traditional routes are exhausted.
Fleet Insurance Policies
- Company Vehicles: For accidents involving company vehicles, fleet insurance policies may still be valid.
- Policy Tracing: Utilise specialist services to trace historical fleet insurance policies.
Vicarious Liability
- Employee Actions: Even if the company is defunct, their insurer may be liable for accidents caused by employees during work duties.
- Scope of Employment: Establish that the driver was acting within the scope of their employment at the time of the accident.
For claims against defunct professional or clinical service providers:
Professional Indemnity Insurance
- Run-off Cover: Many professional indemnity policies include run-off cover, which may be valid even after the business ceases trading.
- Regulatory Bodies: Contact relevant professional regulatory bodies who may have information on insurance or compensation schemes.
Alternative Dispute Resolution
- Ombudsman Services: Some sectors have ombudsman services that can help with claims against defunct companies.
- Mediation: Consider mediation as a potentially quicker and less costly route to resolution.
Each type of claim requires a nuanced approach, often necessitating specialist legal advice. The key is to thoroughly investigate all potential avenues for compensation, considering the specific nature of your claim and the circumstances surrounding the defunct company. With persistence and the right strategy, it’s often possible to pursue a successful claim even against companies that are no longer trading.
What to do if You Want to Claim
If you believe that the company that you wish to pursue a claim for personal injury compensation against has gone in to administration or no longer trades you obviously won’t know where you stand until you get some specialist help. Why not contact us and let us do some investigations for you. We’ll be able to find a solicitor willing to look in to the claim and they can then evaluate the likely outcome should any claim be made. Remember, it costs you nothing to look in to claiming or making a claim for personal injury compensation. There is nothing to pay if the claim doesn’t succeed, so you have nothing to lose.
While claiming compensation from companies that have ceased trading or are in administration presents unique challenges, it’s not impossible. Professional legal guidance is crucial in navigating these complex situations and maximising your chances of receiving fair compensation.
Frequently Asked Questions
Yes, as long as you’re within the 3-year limitation period and can trace their insurance from the time of the incident.
Your options become limited, but you may still be able to claim against directors personally in some cases or through the FSCS if applicable.
Your claim becomes part of the company’s debts and shouldn’t directly impact current employees.
These claims often take longer due to the complexities involved. It could be several months to years, depending on the circumstances.
Yes, but it’s even more complex. You’ll need specialised legal advice, and the process may involve international law.
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