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Insurers urge preparation for Corporate Manslaughter Act

02 January 2008

With just three months to go before The Corporate Manslaughter Act comes into force on 6 April 2008, specialist insurer Hiscox is calling upon companies to review their existing risk management procedures.

Existing risk management procedures are unlikely to provide adequate protection to new exposures introduced under the new legislation. It is estimated that the new Act could potentially cost UK plc £21.2million in legal bills. [1]

After a decade-long parliamentary battle, the legislation will hold executives responsible when corporate negligence results in death at work. The law leaves companies facing a criminal conviction and unlimited fines following fatal accidents if there has been gross failure by senior managers. Not only does the law increase the pressure on UK boardrooms, but businesses will need to take a fresh look at whether they are covered financially for the worst. Currently, more than 50 per cent of employers have admitted that they are not ready for the introduction of the new law. [2]

A standard Directors’ and Officers’ (D&O) insurance policy [3] will only provide cover for a senior individual within a company being prosecuted for management failure leading to a death of an employee or a third party. It will not cover the costs of the company’s defence of such an allegation and the wider stigma of being associated with a negligent individual.

Callum Taylor, Management Liability Underwriting Manager, Hiscox said: “With less than 100 days to go until the Corporate Manslaughter Act comes into force, companies could face prosecution for breach of their duty in areas they have not previously considered. As well as having to cope with expensive legal bills, companies facing legal action under the new Act risk their reputation being damaged, and the day to day running of their business being disrupted. The new Act comes into force as recent research conducted by Hiscox has revealed that compliance with UK company law is a significant concern for nearly two thirds of smaller businesses (66 per cent), while a third of SMEs are concerned that their business could become a victim of the UK’s growing compensation culture. [4] We don’t yet know how often or how rigorously judges will implement this law, but one thing very clear is that the Act is going to be another worry to add to the many already faced by businesses. However, it’s essential that companies stay abreast of the ever-changing regulatory environment and use the next three months to prepare for the Act’s introduction.”

Hiscox tips to prepare your business:

..Create a safe working environment: Review existing health and safety policies to ensure they are up to date and robust. The Health and Safety Executive can provide businesses with advice on developing and implementing effective health and safety procedures:
..Familiarise yourself with the Act: It is essential that you are aware of the finer details of the Corporate Manslaughter Act and fully understand its implications for your business. Visit the Office of Public Sector Information for guidance:
..Drive awareness: All employees need to be aware of the new legislation, so use the coming months to highlight its introduction across all levels of your organisation. Appointing an individual within your company, who can respond to any questions staff may have, will help ensure relevant information is effectively communicated.
..Make sure your business is covered: In the event of a fatal accident in the workplace, it’s critical that you have appropriate insurance. Seek expert help if you’re unsure about your current level of business cover.

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