Corporate Manslaughter and Management Liability

The Corporate Manslaughter and Corporate Homicide Act 2007

Coming into force on 6th April 2008, the Corporate Manslaughter and Corporate Homicide Act 2007 sought to broaden the law on corporate manslaughter in the UK, and to make prosecution of organisations easier when a corporate management failing caused a fatality.

Before the Act, a corporation could only be convicted of manslaughter if a single employee of the company committed all elements of the offence, and was of sufficient seniority to be seen as embodying the ‘mind’ of the organisation.

The Act, when introduced, was expected to make convictions more commonplace. However, prosecutions have been more infrequent than predicted, with only 27 convictions so far, totaling as less than two per year. 

MPR Underwriting, in this article, have outlined the argument that the profile of the new law and the emphasis placed on the punishments may have improved the statistics, both for conviction and fatalities. Figures published on 6th July 2023 show the total of worker deaths in 2022/2023 to be 135 – slightly higher than for 2021/22 (123), but lower than the figure for 2020/21 (145). The Crown Prosecution Service would also have to expend time and resources to charge an organisation for corporate manslaughter – demonstrated in the case of Lion Steel Equipment Ltd., where a worker was killed by falling through a roof panel, and the cost of securing the conviction was estimated to be £140,000. 

Inside MPR Underwriting’s findings

The CPS was highly willing to bring charges against individual directors, thereby putting pressure on the corporate entity to plead guilty. This highlights a potential quandary for directors – by acting in their own best interests, they could be in breach of a duty to their organisation. The prospect of a possible custodial sentence, however, with a maximum tariff of life imprisonment for gross negligence manslaughter, could persuade them to prioritise their personal position over the company.

It is also notable that even the largest companies to be convicted under the Act are still relatively small. This can be lent to the lack of complexity in the management structure – had they a management team that had taken steps to protect employees, or lacked the obvious identification of management failings, they could have escaped prosecution. 

Contracts of insurance also tend to overlap, here, with General Liability covers (Public Liability and Employers Liability) and Management Liability. General Liability insurers can provide legal protection under a ‘Defence of Legal Rights’ provision, or similar. ‘Cover for Insured’s Persons’ being prosecuted in a criminal court will be included, or a formal investigation or disciplinary hearing brought against an Insured Person (all employees) by a regulatory body. 

Directors & Officers lawyers believe that General Liability will cover the organisation, whilst D&O is designed to cover the management team for their breaches of duties and actual/alleged wrongdoing. This, whilst theoretically effective, is complicated by the emergence of Corporate Legal Liability as an extension to Management Liability policies. Conflicts taking place between insurers, particularly whilst a decision is being made whether (and who) to prosecute, will not be a surprise. The GL could be seen as the more specific cover, a position supported by the ML contract to exclude claims ‘for’ bodily injury. However, much will depend on both the pattern of facts, and on the respective quality of the GL and ML contracts. 

The position has not fundamentally changed from a ML perspective for many years. The statistical risk to managers remains low, but an accident can expose directors to a long period of anxiety and hefty fines that cannot be covered by insurance. Up to £250,000 in defence costs cover can be provided by affirmative cover, for claims against the organisation for corporate manslaughter. This is in addition to defence costs cover for claims against individuals as a result for criminal proceedings for manslaughter. The policies also provide cover for costs associated with Health and Safety investigations against the organisation and insured persons. It is almost impossible, however, to define a position, as there is no clearly marked roadmap for the route that a claim should, or will, ultimately take. 

Talk to L Wood today about how we can help with business insurance. 

Referenced article: https://www.mprunderwriting.com/corporate-manslaughter-and-management-liability/