Corporate Liability – are you properly protected?

 Creative Risk Solutions highlight the legal obligations on Directors under the Corporate Manslaughter & Corporate Homicide Act in April 2008 and emphasise the need to check your existing arrangements.

Since the implementation of the Corporate Manslaughter & Corporate Homicide Act in April 2008 an organisation’s guilt is now commonly judged by the way its activities are managed by senior management and if that amounts to a gross breach of the duty of care owed to employees and the public. These duties are the usual ones owed under law: for example, occupiers’ liability, the supply of goods, the use of vehicles and machinery, health and safety and the general law of negligence.

While the Act created no new legal obligation on businesses, and effectively removed the prospect of any person being held responsible, individuals still remain liable under health & safety law and general common law for the manslaughter offence.

The biggest difference created by the new Act is that the number and likelihood of successful prosecutions against companies has risen substantially. While the existing penalties of unlimited fines and remedial action continue, Courts can also make “publicity orders” following convictions, forcing companies to publish details of their offence and penalties. Such negative publicity risks have become a major driver for businesses to improve and maintain their health and safety practices. The Act has also helped enforce a health and safety culture that should permeate throughout all the management levels of a business ensuring it can keep abreast of all new developments in their industry.

There have inevitably been major insurance implications arising from the Act -  primarily involving liability insurance protection (Employers and Public/Products Liability) and Directors and Officers Liability insurance.

By definition, corporate manslaughter events involving the death of one or more employees or members of the public are likely to be substantial claims under a company’s Employers or Public Liability policy (or both). Indeed it’s difficult to think of corporate manslaughter circumstances where liability insurers would not be involved. As well as meeting compensation awards for claims for the death of employees and third parties, liability policies will also normally cover the legal defence costs arising from such claims. It is therefore important that indemnity limits are maintained at an adequate level with a good safety margin for legal defence costs.

Directors and Officers Liability insurance is primarily aimed at protecting the liability of individuals in a company for compensation, awards and legal defence costs for wrongful acts committed in their capacity as a director or officer of the company. Prosecutions under heath and safety law or common law against individuals would certainly constitute wrongful acts and activate the Directors and Officers cover even if the businesses liability insurance protection had not been triggered by the event in question.

It is therefore essential that existing policies are checked to ensure protection is in place.

Creative Risk Solutions are pleased to report that they have been working closely with insurance and risk management specialists to develop a comprehensive approach to the risks Technium members can face, not only if undertaking R&D phased work but also when moving into the production/processing and servicing stage of company life.  Final agreements are being put into place and full details will be announced in the January newsletter. 

For further information please contact Cefyn James at Creative Risk Solutions on 02920 822609 or email
CJames@creativerisksolutions.co.uk

Submitted: 8th December 2009