Under the weight of public pressure, the government and Health and Safety Commission (HSC) continue to push for the increased accountability of companies in the case of health and safety breaches. And the decision makers, directors and officers are also under scrutiny.
Recently, a joint appeal was made by Bill Callaghan, chair of the HSC, and environment minister Michael Meacher to the top 350 UK companies to assist the HSC in tackling the cost of injuries and ill health at work, estimated at £18m a year. The message was conciliatory – work with us to set ambitious and achievable targets for health and safety performance and commit to providing a statement of progress in your annual report.
But behind this, there are more far-reaching measures that will increase the need for accountability of directors and officers. This will undoubtedly be reflected in a rise in claims and subscription to directors' and officers' (D&O) liability insurance policies.
Individual liability for breaches of health and safety law currently stems from section 37 of the Health and Safety at Work Act 1974. Under this section, where a company's breach of health and safety law is attributable to the consent, acquiescence or negligence of a director or officer, that individual can be criminally prosecuted for the breach. Whether an individual is found to have acted negligently will depend on an assessment of the actions and, therefore, evidence of accepted practice may be critical.
Departing from the code
The HSC is currently considering consultation responses to its draft code on the “Health and Safety Responsibilities of Directors”. Complying with the code may not be law, but directors or officers may find themselves in a difficult position if they have to justify why they have departed from it. Notable provisions include:
When a court comes to consider this question in the future, evidence of compliance with, or departure from, a code of practice may be critical. A director who cannot justify departure from the code may be at greater risk of prosecution under section 37.
Undoubtedly, directors concerned about their increased accountability may turn to D&O policies. While fines or penalties arising from the criminal prosecution cannot be covered by such policies, legal expenses incurred when defending prosecutions for “wrongful acts” are. Wrongful acts include neglect but, following Wimpey vs Poole (1984), a wrongful act need not be linked to negligence and can be caused by act or omission – therefore covering the consent and acquiescence elements of a section 37 offence.
Call for corporate killing law
In addition to the proposed code, public pressure is also increasing for the introduction of “corporate killing” legislation. While the current corporate killing bill is unlikely to be finalised this year, it is anticipated that it will materialise in 2002. Under the draft provisions, the offence of manslaughter is to be replaced by three separate offences: reckless killing, killing by gross carelessness and corporate killing. The offence of killing by gross carelessness will be particularly pertinent to directors and officers.
Killing by gross carelessness provides for the personal liability of directors or managers who exercise their responsibilities in such a careless way that there is a risk (which would be obvious to the reasonable person) that such conduct will cause death or serious harm resulting in death. The director or officer must be capable of appreciating the risk and their conduct must fall well below that which could have reasonably been expected. Those found guilty of this offence can be sentenced to an unlimited fine and/or imprisonment.
The difference between the current law and this draft clause is that it is no longer the director who has to be the one who personally breaches health and safety law. Under this draft clause, the director could be potentially guilty if his company fails to implement a management system sufficient to enable the corporate body to comply with health and safety law. When these proposals are read together with the proposed code of practice, the more far-reaching measures of the overall approach become clear.
Therefore, the clear emphasis from the government and the HSC is that companies must ensure top-to-bottom management of health and safety. In the absence of such management, directors could end up being personally liable for breaches of section 37 or, in the future, for corporate killing.
As the risk of individual liability increases, the demand for D&O policies (so far as they can lawfully insure directors) will undoubtedly follow suit.