Specialist insurer Hiscox Plc has issued a stark warning to UK companies of their exposures to increased liabilities when the UK’s Corporate Manslaughter Act comes into force on April 6, 2008.
The legislation had been the subject of heated parliamentary debate for over a decade before it was finally adopted. Under its provisions, Hiscox notes, executives will be held 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.”
The impending law has caused the boards of directors of UK companies to re-examine their potential liabilities. It has also convinced most UK businesses that that they “will need to take a fresh look at whether they are covered financially for the worst,” said Hiscox. “Currently, more than 50 per cent of employers have admitted that they are not ready for the introduction of the new law [citing a recent survey].”
Failure to address the increased liabilities could be costly. According to government figures the new Act could potentially cost UK companies £21.2 million ($42 million) in legal bills alone. As a result, Hiscox is calling upon companies to review their existing risk management procedures, which, it warns, “are unlikely to provide adequate protection to new exposures introduced under the new legislation.”
“A standard Directors’ and Officers’ (D&O) insurance policy [citations] 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,” Hiscox pointed out. “It will not cover the costs of the company’s defense of such an allegation and the wider stigma of being associated with a negligent individual.”
Callum Taylor, Management Liability Underwriting Manager, Hiscox added: “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 percent), while a third of SMEs are concerned that their business could become a victim of the UK’s growing compensation culture” [largely blamed on the U.S. legal system].
Taylor also noted that it’s still unclear how vigorously the law will be enforced, but he added it does constitute an “additional worry” for UK businesses. Getting ready for its arrival over the next three months is therefore of critical importance.
Hiscox offered the following “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: www.hse.gov.uk.
— Familiarize 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: http://www.opsi.gov.uk/acts/acts2007/ukpga_20070019_en_1.
— 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 organization. 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.
Source: Hiscox – www.hiscox.com
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