What If My Employer Has Gone Bust — Can I Still Claim?
One of the most deflating moments in the early stages of a workplace injury or industrial disease claim in Scotland is the discovery that the employer responsible for the harm is no longer in business. The company has been dissolved, wound up, placed into administration, or simply ceased trading. There is no longer anyone to sue, no active business to pursue, and no obvious source of compensation. For many injured workers and their families — particularly those dealing with industrial diseases like mesothelioma or asbestosis where the relevant employment may have ended decades ago — this discovery can feel like the end of the road before the journey has even begun.
It is not the end of the road. The law of Scotland, working alongside a series of statutory schemes, regulatory frameworks, and tracing mechanisms, provides multiple potential routes to compensation even where the employer no longer exists. Understanding those routes, how they operate, and what is required to access them is the purpose of this essay.
Why Employers' Liability Insurance Is the Key
The starting point for understanding how claims against defunct employers work is the system of compulsory employers' liability insurance. As explained in the essay on workplace accident rights, every employer in Scotland who employs one or more workers is legally required under the Employers' Liability (Compulsory Insurance) Act 1969 to hold employers' liability insurance with a minimum cover of five million pounds.
The critical feature of that insurance — the feature that makes claims against dissolved employers possible — is that the insurance policy does not dissolve with the employer. An employers' liability insurance policy is a contract between the employer and the insurer. When the employer ceases to exist, the policy does not disappear. The insurer's obligation under the policy — to meet valid claims arising from the employer's liability to their employees — survives the dissolution of the employer.
This means that in many cases where an employer no longer exists, the insurer that provided their employers' liability cover during the relevant period of employment remains liable to meet a valid claim. The claim is brought against the insurer directly rather than against the employer, and the insurer steps into the position the employer would have occupied had they remained trading.
The practical challenge is identifying which insurer provided the relevant cover, during which periods, and tracing that insurer — which may itself have been acquired, merged, or restructured in the decades since the policy was in force.
The Employers' Liability Tracing Office
The Employers' Liability Tracing Office — known as ELTO — is the primary mechanism for tracing employers' liability insurance policies in the UK. ELTO maintains a database of employers' liability insurance policies, and member insurers are required to upload details of their policies to the database, including historical policies going back to 1972.
Your solicitor will search the ELTO database using the employer's name, registration number, or other identifying information to locate the relevant policy or policies. The search can identify the insurer, the policy number, and the period of cover — the essential information needed to bring a claim against the right insurer.
The ELTO database is not comprehensive. Policies predating 1972 are not included, and there are gaps in the historical records even for the period after 1972. Some insurers have not fully complied with their obligations to upload historical policy data. Where the ELTO search does not produce a result, further investigation is required — searching Companies House records, reviewing historical insurance industry directories, contacting the employer's former solicitors or accountants, and in some cases approaching the Association of British Insurers for assistance.
The Third Parties (Rights Against Insurers) Act 2010
Before a claimant can bring a direct claim against an insurer for a dissolved employer's liability, they need a legal mechanism that transfers the employer's rights under the insurance policy to the injured worker. That mechanism is provided by the Third Parties (Rights Against Insurers) Act 2010.
Under the 2010 Act, where an insured person — the employer — is subject to an insolvency event including dissolution, the third party's rights against the insurer are transferred directly to the third party — the injured worker. This means that the injured worker can pursue the insurer directly without first having to obtain a court judgment against the dissolved employer and then seek to enforce that judgment against the insurer.
The 2010 Act significantly simplified the process of claiming against insurers for dissolved employers. Before it came into force, the process was considerably more cumbersome — involving the restoration of the dissolved company to the Companies House register before proceedings could be raised. The 2010 Act removed that requirement in most cases, streamlining the route to compensation for injured workers and their families.
Where proceedings do need to be raised, they are raised against the insurer directly. The insurer defends the claim in the same way the employer would have defended it — investigating liability, assessing quantum, and negotiating or litigating the claim to a conclusion.
Restoring a Dissolved Company to the Register
In some cases — particularly older claims where the 2010 Act does not apply or where the insurance position cannot be established without first restoring the company — it may be necessary to restore the dissolved employer to the Companies House register before proceedings can be raised.
A dissolved company can be restored to the register either administratively — through an application to the Registrar of Companies — or by court order. Restoration by court order is the more common route in the context of personal injury and industrial disease claims. An application is made to the court for an order restoring the company to the register for the purpose of the claim, and if granted, the company is treated as if it had never been dissolved for the purposes of that litigation.
Restoration is a procedural step rather than a substantive obstacle — it is a mechanism for accessing the insurer rather than a barrier to the claim itself. Your solicitor will manage this process where it is required.
The Financial Services Compensation Scheme
Where the employers' liability insurer itself has become insolvent — where the insurer, not just the employer, has ceased to exist — the Financial Services Compensation Scheme comes into play. The FSCS is the UK's statutory compensation fund of last resort for customers of authorised financial services firms that have failed, and it covers employers' liability insurance claims where the insurer is insolvent.
The FSCS will meet one hundred percent of a valid employers' liability claim where the relevant insurer is insolvent and the FSCS has declared a default in relation to that insurer. A number of historic employers' liability insurers — particularly those who wrote large volumes of asbestos-related risk — have become insolvent over the years, and claims against those insurers are now handled through the FSCS.
Your solicitor will identify whether the relevant insurer is the subject of an FSCS declaration and, if so, will submit the claim to the FSCS in the appropriate way. The FSCS has its own claims process and timescales, and experience of navigating that process is a valuable attribute in a solicitor handling historical industrial disease claims.
The Diffuse Mesothelioma Payment Scheme
For the specific category of mesothelioma claims where the employer no longer exists and the employers' liability insurer cannot be identified or traced despite reasonable efforts, the Diffuse Mesothelioma Payment Scheme — established under the Mesothelioma Act 2014 — provides a route to statutory compensation funded by a levy on current employers' liability insurers.
As discussed in the essay on mesothelioma and asbestos claims, the scheme pays lump sum awards at a percentage of the average civil damages for mesothelioma in the relevant age bracket. The scheme is available to people in Scotland diagnosed with diffuse mesothelioma who cannot bring a civil claim because the employer and their insurer cannot be found.
The scheme is a safety net of last resort for mesothelioma — it is only available where the civil route through an identified insurer is genuinely not available. Where an insurer can be traced, the civil claim remains the appropriate route and will produce higher compensation than the scheme.
The Pneumoconiosis etc. (Workers' Compensation) Act 1979
For dust-related lung diseases — including asbestosis, pneumoconiosis, and other prescribed conditions — the Pneumoconiosis etc. (Workers' Compensation) Act 1979 provides statutory lump sum payments from the Department for Work and Pensions where the employer has ceased trading and a civil claim is not possible.
The payments under the 1979 Act are based on the claimant's age and level of disability and are significantly lower than civil damages. However, they are available without the need to establish fault or trace an insurer, and they can be claimed quickly and without the complexity of civil litigation. Crucially, a payment under the 1979 Act does not preclude a civil claim if an insurer is subsequently identified — the payment must be repaid from any civil compensation recovered, but the civil claim remains available.
Industrial Injuries Disablement Benefit
Alongside any civil claim or statutory compensation scheme, workers with industrial diseases caused by their employment — including conditions caused by employers who no longer exist — may be entitled to Industrial Injuries Disablement Benefit from the Department for Work and Pensions. This benefit is payable regardless of whether a civil claim is possible and regardless of whether the employer still exists. It is based on the claimant's level of disability and the prescribed nature of their condition, not on the solvency or existence of the employer.
What If No Insurance Can Be Found?
There are cases — typically involving very old employment, very small employers, or employers who failed to comply with their legal obligation to hold insurance — where no employers' liability policy can be identified despite thorough investigation. In those circumstances, the options are more limited but may not be exhausted.
Where an employer traded without the required insurance in breach of their statutory obligation, the dissolved company may have residual assets — property, outstanding debts owed to it, or other recoverable assets — that can be pursued through the insolvency process. Your solicitor can investigate the company's filing history at Companies House and advise on whether any assets existed at the time of dissolution.
Where the employer was a sole trader or partnership rather than a limited company, the personal assets of the individual or partners may be available to meet a judgment. Sole traders and partners do not have the protection of limited liability, and their personal assets are available to creditors including personal injury claimants.
Where none of these routes produces a result, the statutory compensation schemes described above — the 1979 Act for dust diseases, the Diffuse Mesothelioma Payment Scheme for mesothelioma — provide a measure of compensation even in the most difficult cases.
The Limitation Position
The three year limitation period under the Prescription and Limitation (Scotland) Act 1973 applies to claims against dissolved employers and their insurers just as it does to claims against active employers. For industrial disease claims, the date of knowledge provisions apply — the clock runs from the date the claimant knew or ought to have known that their condition was attributable to their employment.
The dissolution of the employer does not extend the limitation period or create any special exception. A claimant who discovers that their employer has been dissolved must take legal advice and begin the process of identifying the insurer promptly — the limitation clock does not stop while the investigation is ongoing.
The Practical Steps
If you have been injured in a workplace accident or diagnosed with an industrial disease in Scotland and you have discovered that your former employer no longer exists, the practical steps are clear.
Instruct a solicitor with specific experience in claims against dissolved employers and historical industrial disease litigation. This is a specialised area where experience matters — the ELTO search, the FSCS process, the restoration procedure, and the statutory schemes all require familiarity that a general personal injury solicitor may not have.
Gather everything you can about your former employment — the company name, any registration numbers, the addresses of the workplaces, the dates of your employment, and any documentation from the employment period including wage slips, P60s, or correspondence. Trade union membership records can also be valuable in tracing historical employers and their insurers.
Do not assume that the dissolution of the employer means the end of any claim. In the vast majority of cases, a route to compensation exists — through a traced insurer, through the FSCS, through a statutory scheme, or through a combination of these routes. The investigation takes time and requires expertise, but it is an investigation that regularly produces results.
The Bottom Line
The dissolution of an employer does not dissolve the rights of the workers they injured. The system of compulsory employers' liability insurance, the ELTO database, the Third Parties (Rights Against Insurers) Act 2010, the Financial Services Compensation Scheme, and the statutory compensation schemes for specific industrial diseases together create a network of routes to compensation that covers the vast majority of cases where an employer no longer exists.
The process is more complex than a standard personal injury claim and requires specialist expertise. But it is a process that works — and for workers and families dealing with the consequences of industrial disease or a serious workplace injury, understanding that the dissolution of the employer is an obstacle to be navigated rather than a barrier that cannot be crossed is the essential first step.