This article hopes to provide you with a valuable insight concerning the new Act; and to educate you about the potential pitfalls which could be faced by businesses just like you from April 08.

The New Law on Corporate Manslaughter (and why most businesses are not insured) comes in to force next April and sees the introduction of the Corporate Manslaughter and Corporate Homicide Act of 2007. The background to the reasons behind the introduction of the new Act lies in the high profile failures by the Crown Prosecution Service to actually prosecute those companies where clearly there has been a serious breach of negligence which has resulted in loss of life. For example consider the major rail disasters of the late 90s and early 2000s, notably Hatfield, Charing Cross and Paddington.

In other words, there have only ever been seven successful prosecutions as a result of Corporate Manslaughter and none of the seven have been large organisations.

As a result of tragic occurrences following negligence and work related death, the Government has finally decided to take action and following a draft bill in April 2005; the Act becomes law on the 1st April 2008. The Corporate Manslaughter and Homicide Act 2007 has been brought into being to introduce legislation to now finally prosecute poorly run organisations. The HSE have identified that between 70-85% of deaths at work can be attributed to management failings and prior to April 08 the only real route was to pursue individuals within companies under gross negligence manslaughter.

The new law will encompass a relevant duty of care towards:

  • Employees
  • Other persons working for the organisation
  • Other persons performing services for the organisation
  • Duties arising out of occupation of the premises
  • Duties in connection with the supply of goods

If the Act is successful, the sanctions could result in unlimited fines and contributions towards the CPS Prosecution Costs for organisations found guilty of Corporate Manslaughter, as well as irreparable damage to its reputation. The Court will also be empowered to lay down a remedial order and a publicity order following a successful prosecution.

What Can You Do To Protect Yourself?

In a nutshell seek adequate insurance protection! Smart & Cook provides risk management services to protect businesses. However, first and foremost in respect of health and safety, management must introduce, maintain and demonstrate a robust approach through relevant training, regular assessments and essentially, regular updates.

The risk assessments need to be tailored to specific circumstances and firms are advised to avoid using generic risk assessments.

Once those basics are in place firms are provided with regular checks and audits to monitor performance to the extent that the advice is to use disciplinary proceedings where necessary when there are non-compliances within the remit of the new law.

Whilst trying to highlight the avoidance of prosecution, it should be considered that there are positives to businesses that follow correct advice; in that businesses which avoid fatalities will avoid the uninsured costs of time taken by senior management in assisting in the defence of any court case. The impact on its reputation which can lead to a reduction in turnover and the direct financial exposures through unlimited fines, prosecution costs and their own legal team costs could be the death of your organisation.

Insurance Position

Employers liability

In respect of the civil damages, the policy extends to include legal costs associated with a civil claim. A standard Employers Liability policy can extend to legal costs to defend a prosecution under the 1974 Health & Safety Act or SIMILAR SAFETY LEGISLATION. The HSE website categorically states that the New Corporate Manslaughter Act is not safety legislation. The policy will not cover fines or penalties and it will not cover the costs associated with remedial or publicity orders.

Directors' & officers' insurance

In respect of the new Act the individual Director, Manager or Officer will be covered for defence costs (not fines or remedial and publicity orders).

Most D & O policies do not cover the Actions of the body corporate (Entity) those D & O policies which have been extended to cover the Entity will only indemnify for Corporate Manslaughter Costs within the Health & Safety Section where the maximum inner indemnity limit is usually no more than £100,000.00.

Summary

Since the new Act only affects Limited Companies, Partnerships and other similar organisations it can be seen that there is unlikely to be an adequate measure of legal defence costs indemnities under any of the standard policies arranged for Companies.

About Smart & Cook

Smart & Cook provides professional insurance broking, financial advice and risk management services, and is now recognised as one of the UK's leading independent insurance organisations, with a national network of 28 regional offices. Smart & Cook also provides specialist cover to a range of niche markets such as healthcare professionals, farmers and financial institutions.

In April 2007 Smart & Cook was acquired by global insurance company AXA to create the UK's second largest SME insurance broker with a combined 1,200 staff and £400m of premiums. The deal provides Smart & Cook with yet greater financial stability, increased resources and additional services, whilst allowing it to continue to provide totally independent advice to clients and support its ambitious growth strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.