Corporate Manslaughter – New Guidelines

In the 18th century, Lord Chancellor, Baron Thurlow stated:

“Corporations have no soul to damn and no body to kick, they therefore do as they like”

18th Centruy Industry - Shutterstock

This attitude remained within English law until the case of MS Herald of Free Enterprise.

MS Herald of Free Enterprise was a ferry which capsized moments after leaving the Belgian port of Zeebrugge on the night of 6th March 1987, killing 193 passengers and crew. The ferry had been designed for rapid loading and unloading, so there were no watertight compartments. When the ship left harbour with her bow door open, the sea immediately flooded the decks, and within minutes she was lying on her side.

Investigations found that many employees had failed in their responsibilities that day – one employee had failed to close the bow doors; another had failed to ensure the bow doors were closed; and a final employee had left port without knowing whether or not the bow doors were closed.

A public Court of Inquiry into the incident was held under British Lord Justice Sir Barry Sheen in 1987. The Sheen Report severely criticised the attitude to safety prevalent in P&O, stating:

“All concerned in management… were at fault in that all must be regarded as sharing responsibility for the failure of management. From top to bottom the body corporate was infected with the disease of sloppiness”

This case lead to confirmation that a company can, in principle, commit manslaughter.

Twenty years later, we saw the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007, which created a means of accountability for deaths caused by very serious management failings.

Since the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007, Lion Steel Ltd was charged in relation to the death of 45-year-old employee Steven Berry who fell through fragile roof panelling sustaining fatal injuries. The company pleaded guilty to the offence on 4th July 2012 and was fined £480,000.

In another case, Paul Bowers, 47, was killed on 26 January 2013 when a pile of metal “stringers”, delivered to the warehouse in Hanger 14 of Cambridge airport, toppled on to him. The prosecution said CAV Aerospace Limited was responsible for ordering stock and maintaining health and safety at the warehouse run by a subsidiary. The company, based in Consett, County Durham, denied charges of corporate manslaughter and breaching health and safety but was found guilty.

So why are we talking about it now?

As of 1st February 2016, fines are now intrinsically linked to the turnover of the defendant company. For larger companies, fines may increase from hundreds of thousands into the millions of pounds and fines measured in the millions could become the norm. The Sentencing Council’s Health and Safety Offences, Corporate Manslaughter and Food Safety and Hygiene Offences Definitive Guideline suggests that fines should range from £180,000 to £20,000,000 depending upon the size of a company, but will, essentially, be unlimited. It is clear that the guidelines say that the fine must be sufficiently substantial to have a real economic impact on the defending company and it must bring home, to management and shareholders, the need to comply with health and safety legislation.

Some examples of potential corporate manslaughter incidents that could affect your client include:

–              A pedestrian killed by falling scaffolding

–              A gas leak caused by an unregistered gas fitter

–              An employee injured by faulty machinery

So how can your clients best protect themselves?

Clients should take time to review their existing processes and procedures and consider how the importance of safety can be shared internally so as to improve performance and, ultimately, so that accidents can be avoided.

Where concerns are identified then the following could be considered:

  • An increase in compliance
  • Re-evaluation, re-investment and re-education in health and safety policies
  • Consideration of safety initiatives, procedures and training
  • Consideration of the appointment of a Health & Safety Manager where one does not exist and/or support roles to take responsibility in this area

All of the above will all be crucial to try and ensure that the worst-case scenario never happens. If it does happen, the implementation of the above will enable your client to demonstrate that they did all that they could which could mitigate the impact of an otherwise significant fine.

Your clients should consider the individuals who could be shown to have contributed to any future gross breach of duty of care. The Corporate Manslaughter and Corporate Homicide Act 2007 will put company executives in the firing lines for breaches of health and safety. Directors & Officers liability (D&O) insurance is a relatively inexpensive policy that will be absolutely priceless should a prosecution occur, as it focuses on the directors’ personal financial protection.

Clients should also check their employers’ and public and products liability policies to ensure that the defence and appeal costs are included following any manslaughter. All of Yutree’s liability policies include a Corporate Manslaughter extension as standard.

We hope that you found this article useful. If you would like to discuss liability insurance for any of your clients then please do get in touch with us on 01638 660651 or e-mail us at laura.high@yutree.com

Blurred engineers - Shutterstock

Advertisements

Employers Liability for volunteers, students, sub-contractors, one-man bands – When is it required?

As liability specialists we are often asked to explain when Employers Liability Cover is required under the Employers Liability (Compulsory Insurance) Act 1969 (‘the Act’). It is the nuances of the rules which clients can misunderstand. Here we provide some clarity around those grey areas to assist you in your discussions with your clients.

Employers Liability Insurance covers a company for liability for damages in respect of bodily injury, death or disease caused to employees arising out of and in the course of their employment by the insured. All Employers Liability policies are required by law to carry a minimum limit of indemnity of £5m for any one claim. It is industry standard for cover to be issued with a £10m limit – work carried out offshore &/or with asbestos is an exception to this and is normally limited to £5m. Your client is responsible for the health and safety of their employees while they are at work. The Health and Safety Executive is the enforcement authority for Employers Liability insurance compliance. Your client’s business may be fined up to £2,500 for any day they trade without suitable insurance.

Health & Safety words - Shutterstock

What is the definition of an employee?

Whether or not your client needs Employers Liability insurance depends on the terms of their employment contract. This can be spoken, written or implied. It is the nature of the relationship with the people who work for them and the degree of control that they have over the work that they do which defines how they should be treated for insurance purposes.

One area which is commonly misunderstood by clients is around insuring sub-contractors. Your client will employ sub-contractors on one of two bases:

Labour only Sub-Contractors (LOSC) – LOSCs work under your clients’ supervision and direction. Your client will supply materials and tools. The LOSC is paid wages by the main contractor and is classed as an employee for whom your client should buy Employers Liability insurance

Bona Fide Sub-Contractors (BFSC) – BFSC work under their own supervision and direction. They will provide their own materials and tools. They are generally employed to carry out a specialist/particular type of work within a job (i.e. scaffolding/plumbing etc). The BFSC should have their own liability insurance in place and it is important that your client always checks this for their own protection. If the BFSC’s insurance fails, your client is required to provide contingent cover. If there is an accident and a BFSC is injured and their own employers liability cover fails, your client could be responsible for a claim under their public liability section. Your client does not need to buy Employer’s Liability insurance for BFSC.

So does my client really need the cover?

Your client must have Employers Liability insurance if they have employees unless they are exempt. The following employers are exempt:

  • Most public organisations including government departments and agencies, local authorities, policy authorities and nationalised industries;
  • Health service bodies, including National Health Service trusts, health authorities, primary care trusts and Scottish health boards;
  • Some other organisations which are financed through public funds, such as passenger transport executives and magistrates’ courts committees.

Your client is obliged to insure Employers Liability where:

  • They deduct NI and income tax from the money they pay employees;
  • They have the right to control where and when their employees work and how they do it;
  • They supply their employees work materials and equipment;
  • They have a right to the profit their workers make;
  • They require that person only to deliver the service and they cannot employ a substitute if they are unable to do the work;
  • Their employees are treated in the same way as other employees, for example, they do the same work under the same conditions as someone else they employ;
  • Their employees work for them on an unpaid basis whether they are students, volunteers, interns or other helpers;
  • Their employees are students, on a work experience programme, or taking part in a training programme

Your client may not need employers’ liability insurance where:

  • Their employees do not work exclusively for them (for example, if they operate as an independent contractor);
  • Their employees supply most of the equipment and materials they need to do the job;
  • Their employees are clearly in business for their own personal benefit;
  • Their employees can employ a substitute when they are unable to do the work themselves;
  • Their employees are all close family members (this exemption only applies if the company is not incorporated as Ltd company)
  • They do not deduct income tax or national insurance. However, even if someone is self-employed for tax purposes they may be classed as an employee for other reasons and your client may still need employers’ liability insurance to cover them
  • The company employs only their owner where that employee also owns 50% or more of the issued share capital in the company

If you have any questions, please contact me on 01638 675992 or laura.high@yutree.com or speak to one of our team here at Yutree.

Construction workers - Shutterstock

 

JCT Contract Clause 6.5.1 Insurance

A consequence of the recent recession has been an increase in substantial home renovations being carried out as home owners have been less able, or willing, to move. Extensions into basements, swimming pools being added, and other remodelling work, has seen home owners spending large sums of money on their properties. With this comes a significant exposure which clients will look to their brokers to advise them on.

Townhouses in Chelsea - Shutterstock

The 1958 court case (Gold v Patman & Fotheringham) established the legal principle that the employer (often the home owner or developer) has a liability in tort for damage to third party property where this is not as a result of negligence by the contractor.

It is important for brokers to consider this, often overlooked, part of standard building contracts. Many contractors do not fully understand the implications of JCT clause 6.5.1 and believe that their public liability cover is sufficient. Here we help you to ensure that your clients are not in breach of their contracts and are not leaving their clients exposed.

What does JCT stand for?

The Joint Contracts Tribunal. JCT contracts facilitate the process of constructing buildings. The contracts set out the responsibilities of all parties within the construction process and their obligations.

What is JCT 6.5.1 cover?

JCT 6.5.1 cover is non-negligent damage to third party surrounding property during the undertaking of a contract as required by a standard form of building contract.

For example: Your client is a home owner and is refurbishing their home. If, as a result of the contractor working on weight bearing walls, there is damage to the structure or foundations of a neighbouring property, and the contractor is deemed not to be at fault, your client will potentially be personally liable for the cost of repairing that damage. Standard home or contractors insurance will not cover this type of cost.

Extension - Shutterstock

You can help your client, whether they are the home owner, developer or contractor, to cover this exposure with JCT 6.5.1 cover which is usually issued in the joint names of the contractor and the employer and arranged by the contractor.

Non-negligence cover should always be considered for your clients where piling, excavation, underpinning or basement works are being undertaken. It is usually sensible to arrange this cover with the same insurers who arrange the contractor’s public liability cover to avoid delays in settlement of a claim whilst negligence is disputed.

The risks covered are named within the JCT contract as:

  • Subsidence
  • Collapse
  • Heave
  • Vibration
  • Weakening or removal of support
  • Lowering of ground water

What is a standard form of building contract?

A standard form of building contract is a form of contract containing conditions which are applicable, or can be made applicable by the use of alternatives, to a wide range of building projects.

The construction industry and contract users benefit from the use of standard contracts through time savings, cost savings, the fair allocation of risk and the management of common pitfalls surrounding contractual relations in the building industry. These contracts also reflect the benefits that are accrued through precedent meaning that users can be confident that the contracts reflect a generally acceptable position in practice.

In summary

Assuming that non-negligent cover forms part of public liability insurance leaves your contracting clients in breach of contract. Building contracts require contractors to arrange non-negligent cover on behalf of their clients. Yutree can offer this cover and have created a Quotation Request Form for gathering the relevant information from your clients. Please get in touch if you have any questions about this or if you would like to discuss a risk.

Road Traffic Act vs Public Liability – Who is responsible?

Who is responsible where an accident involves hauliers loading and unloading their vehicles, forklift trucks in a company’s yard, a digger crossing a road to a construction site, a farm vehicle in a field? This has been a grey area for many years with claims often directed to the motor insurers in the first instance and then being bounced back to public liability insurers. These claims can, therefore, take longer to settle due to the lack of clarity as to who is responsible. A recent case in Europe has brought this grey area to the fore in the UK insurance market.

The Basics

A public liability policy will indemnify any person entitled to indemnity against all sums which they become legally liable to pay as damages and claimants costs and expenses arising out of accidental:

  • Injury to any person
  • Loss or damage to material property
  • Obstruction trespass nuisance or interference with any right of way light air or water
  • Wrongful arrest detention imprisonment or eviction of any person

… occurring in connection with the business during the period of insurance within the territorial limits.

However, a public liability policy will exclude liability arising from the use of a motor vehicle where the Road Traffic Act applies, as this cover must be arranged under a motor policy.

If your client’s tractor or machine is registered for road use it must either be SORN’d or insured for third party road risks.

Third party insurance for ‘motor vehicles’ used on a ‘road’ is compulsory and governed by the various Road Traffic Acts.

‘Motor vehicles’ can include all motorised plant, for example, forklift trucks, diggers, tractors and cranes etc.

Tractor - shutterstock

So where lies the confusion?

A frequently asked question is whether an individual can drive uninsured on private land. As it is not public land, on which it is illegal to drive without insurance, there is a commonly held belief that an individual can legally drive without insurance. This is true to some extent. If your client has a right to use private land to which the general public does not have access then you are within your rights to drive on that land without insurance.

However, if the public do have access to the private land then your client must have insurance in order to drive lawfully on that land. A private holiday park, for example, would not be deemed private land in terms of insurance, as it is clearly a place to which the public have access. For public policy reasons, therefore, you must have insurance to drive on this land, even if it is your own private land.

What if an incident occurs on private land and I am not insured?

The UK motor insurance industry is now impacted by events and rulings in Europe. A recent accident in Slovenia has triggered the European Court of Justice to look at the need to insure against civil liability in respect of the use of motor vehicles under the EU Motor Directives.

Under current UK law, there is no requirement to insure your vehicle if it is used only on private land. Where the public do not have access e.g. a farmer may not insure an old Landrover that is only used on fields, and should an accident happen on private land, the insurance company has no obligation to pay out.

Case Study – Vnuk v Triglav

Mr Vnuk was on a ladder which was hit by a tractor reversing a trailer in a farmyard. Falling from the ladder, he was injured and sought compensation from the driver’s insurers, but his case failed. The Slovenian court ruled that the requirement for compulsory motor insurance was limited to the use of the tractor as a vehicle on the road, and the insurance would not, therefore, cover it being used to reverse a trailer in the farm yard.

Mr Vnuk appealed to the European Court where the relevant European law, which applied to the UK and other member states, was considered. The European Court decided that motor vehicle ‘use’ should be interpreted to cover “any use of a vehicle that is consistent with the normal function of that vehicle.”

Here is a link to the EU press release where the Court of Justice acknowledges the current grey area.

What the UK law currently says

Under Article 3(1) of European Directive 72/166/EEC, a member state of the European Union must take all appropriate measures to ensure that should a person be liable under the law in respect of the use of a vehicle, their liability is covered by insurance.

The equivalent UK law that brings in the provisions of the Directive is the Road Traffic Act 1988. However, under the Act, the duty to take out third party motor insurance, and the scope of cover that UK motor insurers must provide, is limited to “the use of the vehicle on a road or other public place”. The Act also defines a motor vehicle as being “a mechanically propelled vehicle intended or adapted for use on the roads”. The UK government has chosen to exclude certain vehicles from the need to have RTA cover. These include:

  • Vehicles owned by certain public authorities
  • Vehicles owned by a police authority
  • Vehicles on a journey for salvage purposes under the Merchant Shipping Act 1995
  • Vehicles owned by a national health service body
  • Ambulances owned by an NHS Trust
  • Vehicles made available under NHS Act 2006
  • Vehicles owned by a person who has deposited £500,000
  • Invalid carriages
  • Tramcars or trolley vehicles operated under statutory powers
  • Vehicles in the public service of the crown

As mentioned previously, under current UK law, there is no requirement to insure your vehicle if it is used only on private land where the public do NOT have access.

European Court ruling

In Mr Vnuk’s case, the Court held that the reversing tractor propelling a trailer was covered by the duty to insure under the EU Directive. The fact that the vehicle, together with its attachment, could be used as agricultural machinery, did not affect its status as a “vehicle”. The “use” of a motor vehicle covers any use of a vehicle that is normal and typical for that vehicle. The location of the vehicle, whether on private land or the road, is therefore irrelevant.

The European Court’s decision in Vnuk v Triglav will mean that the Road Traffic Act 1988 needs to be reviewed and ultimately amended to reflect how the Court has interpreted the EU Directive. The requirement to insure must no longer be limited to situations where the vehicle is being used on a road or other public place. EU member states do, however, have the ability to derogate certain types of vehicle meaning their claims would fall on the MIB. It is likely that when the changes to the law are made, not all vehicles used exclusively on private land will need to be insured.

The case of Vnuk has highlighted that the Motor Insurance Directives have been implemented incorrectly into UK law, as well as many other EU nations, such that victims of accidents who are rightly entitled to compensation are being denied justice. It is for this reason that the Road Traffic Act needs to be reviewed and amended.

One impact of this ruling could have been that a wider definition of motor vehicles was adopted including over thirty new types of vehicles including:

  • Sit on mowers
  • Forklift trucks
  • Golf buggies
  • Electrically assisted pedal cycles
  • All mobility scooters
  • Dodgems
  • Museum exhibits
  • Segways and even remote control vacuum cleaners!

It looks as though provision will be made for the MIB to meet any claim not satisfied by the owner of some vehicles in the same way as any uninsured vehicle. The forthcoming consultation to correct our legislation and to look at how the insurance industry should deal with changes is currently underway.

Golf buggy - shutterstock

Motor or Liability?

In summary, the grey area is currently a little more grey than it was, but will become clearer! It is important to understand the ins and outs to be able to advise your clients correctly. The important thing to remember is that liability policies will exclude any incidents which require compulsory motor insurance. Yutree’s liability wordings deal with this by saying that they do not provide indemnity:

– in respect of which compulsory insurance or security is required under any legislation governing the use of the vehicle, or

– for which compulsory motor insurance or security is required under the Road Traffic Act 1988 as amended by the Motor Vehicles (Compulsory Insurance) Regulations 1992 and the Road Traffic (Northern Ireland) Order 1981 as amended by the Motor Vehicles (Compulsory Insurance) Regulations (Northern Ireland) 1993 or any other Compulsory Road Traffic Legislation

It is then down to helping your clients to ascertain whether their vehicle is classified as a ‘motor vehicle’ under the Road Traffic Act and whether it will be used on private or public land.

BIBA (British Insurers Brokers Association) have been doing a lot of work on this subject to try and influence an outcome which works for the UK market. They are attempting to amend the motor insurance directive but if this is not possible then some vehicles will be derogated to the MIB, some will require new policies and some may even be limited to directive minimum cases only (which is lower than the UK Road Traffic Act). If you have any queries on the matter please feel free to contact me and, if required, I can refer to BIBA on your behalf.

Kind regards

Laura

T: 01638 675992

M: 07712 427988

E: laura.high@yutree.com

Road - Shutterstock

Bartoline – Are your clients exposed?

Are your clients adequately protected in respect of their environmental liabilities? In response to feedback from our brokers, Yutree have done some work to ensure that our liability policies are flexible enough to help you to protect your clients in this area.

The landmark case of Bartoline Ltd v Royal & Sun Alliance (2006) highlighted the limitations of pollution coverage under a public liability insurance policy.

What happened?

Bartonline, an adhesives manufacturer, suffered a fire at their premises. Foam used by the fire brigade to put out the fire, along with some chemicals which leaked as a result of the fire, entered an adjacent watercourse causing pollution.

River - Shutterstock

What costs did the client incur?

The Environment Agency has the power, under The Water Resources Act 1991, to recover the costs from the polluter that they incur in mitigating pollution. They can also issue a Works Notice on the polluter to make them carry out further remedial work if required. Bartoline incurred costs of c£150,000 in complying with the Works Notice and were invoiced by the Environment Agency for a further amount of over £600,000 of expenses.

Why did the insurance not respond?

Royal & Sun Alliance turned down Bartoline’s public liability claim and Bartoline subsequently issued proceedings against them for breach of contract. Their policy provided an indemnity against legal liability for damages. The judge concluded that the word “damages” did not cover costs arising from the Environment Agency exercising their powers under The Water Resources Act 1991. There was, therefore, no ‘legal liability for damages’ as required by the policy wording and therefore the insurer was within their rights to reject a claim for costs incurred through complying with a statutory notice.

How can Yutree help you to protect your clients?

We have negotiated with our liability insurers and can now consider a Bartonline (or Pollution Clean-up Costs) extension to the public liability section on all of our contracts. To consider this extension we would need to know your client’s proximity to any watercourses.

Factory by water - Shutterstock

A quote from one of our brokers on the exposures faced by their clients:

“Hugh J Boswell recognise the considerable exposure faced by our commercial clients with regard to pollution clean-up costs and always recommend that the policy be extended to include Bartoline cover” Rachele Kelsall ACII, Head of Community Broking, Hugh J Boswell

If you would like to discuss this matter further, require this extension or would like to see a copy of wording then please do get in touch with me on 01638 675992 or e-mail me at laura.high@yutree.comThank you, as always, for your continued support.

Kind regards

Laura