With this month's release of the "Revitalising Health and Safety Strategy Statement," corporate entities, directors and officers will face tougher penalties for flouting or failing to fulfill health and safety laws. Ian West explains the risks of corporate guilt and outlines some precautions against them

Politicians, lawyers and the media have for some time been in broad agreement that the existing laws on manslaughter do not adequately address the situation where a corporate entity's recklessness or gross carelessness costs lives.

Under the law, as it stands, proving corporate guilt relies entirely upon proving the individual guilt of a senior company officer. This is perhaps achievable when the courts are faced with a small company. The only two successful convictions to date have involved "one-man bands."

However, as recent cases have shown, the current laws on manslaughter have proven ineffectual when applied to large corporations

In May of this year – almost four years after Law Commission Report No. 237 suggested the introduction of an offence of "corporate killing" – Home Secretary Jack Straw unveiled the government's proposals. The consultation paper suggests that entities involved in fatal accidents, and whose conduct falls "far below" what could reasonably be expected, may be charged with the offence of "corporate killing."

If convicted, the offending entity may face unlimited fines and court orders to ensure that a similar situation never arises again. Conviction of the entity could also lead to the disqualification of individual directors or officers.

The proposed new legislation will apply to all undertakings, making it easier to obtain successful prosecutions against charities, hospital trusts, local authorities and partnerships, as well as large corporations.

Moreover, entities based outside England and Wales may be subject to the new legislation if they cause fatalities within the jurisdiction.

The implications of this proposed law for the commercial clients of brokers needs no elaboration. However, in the risk management role that brokers should now be undertaking with clients, it is essential that companies be made aware of the dangers that may lie ahead.

On the individual level, three new offences will replace the crime of involuntary manslaughter. Directors or officers whose management decisions contribute to a fatality may be charged with:

  • reckless killing, punishable by life imprisonment;
  • killing by gross carelessness, carrying a prison sentence of ten years; or
  • unintentional killing, punishable by five to ten years in prison.

    Any director, officer or broker who still feels untroubled after reading the foregoing might give some thought to the Government and Health and Safety Commission joint "Revitalising Health and Safety Strategy Statement."

    The Statement sets out ten-year targets for reducing deaths and ill-health at work. Amongst other things, the accompanying 44-point action plan suggests tougher and more innovative penalties for both entities and individuals caught flouting health and safety laws.

    It proposes that a particular director or officer be made accountable for health and safety within each organisation. It also advocates the publication of an annual report "naming and shaming companies convicted of health and safety offences in the preceding year."

    When deputy prime minister John Prescott unveiled the statement in June, he said: "Health and safety is a priority issue for those at the top of all organisations and they must be prepared to face the consequences of ignoring the law; in future that could well mean prison."

    So far the schemes are mere "proposals," but with widespread public support, they are certain to become law before long. Action is required now to ensure companies are not left exposed.

    Entities, including partnerships and charities, would be wise to review their insurance programmes in preparation for what is to come. Obviously, there is no substitute for a clear and considered health and safety strategy – preferably pre-approved by legal counsel. It must also be borne in mind that no insurer can offer indemnity for criminal fines and penalties, as this would be contrary to public policy.

    However, if the unthinkable should happen, both the entities and their directors must ensure that they can call on expert legal assistance.

    Fortunately, the market can provide some protection through, for example, directors' and officers' liability, charity trustees and "entity" insurance products, which can help in achieving this essential degree of security.

  • Ian West is professional and financial risks underwriter at R E Brown & Others Syndicate 702 at Lloyd's.

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