Impending Corporate Manslaughter Bill could lead to over £21m in legal bills
Hiscox has urged UK companies to prepare for the The Corporate Manslaughter Act, which comes into force on 6 April.
In a statement the insurer said that companies needed to review their existing risk management procedures, which 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.
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, Hiscox said, but businesses will need to take a fresh look at whether they are covered financially for the worst.
According to research, more than 50 per cent of employers have admitted that they are not ready for the introduction of the new law.
Though a standard D&O policy will 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 , while a third of SMEs are concerned that their business could become a victim of the UK’s growing compensation culture."
He added: "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."
