Company Insurance rethink may be needed when Corporate Manslaughter Act passed

The Corporate Manslaughter Bill which is expected to be passed before the parliamentary summer recess in July will mean that more companies will need to review their insurance policies. If passed, the legislation leaves companies facing a criminal conviction and unlimited fines following fatal accidents if there has been gross failure by senior managers.

A standard Directors’ and Officers’ (D&O) insurance policy will only 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. As a result many companies will need to review their insurance cover to ensure their cover will respond adequately when faced with such a claim.

Callum Taylor, Management Liability Underwriting Manager, Hiscox said, “The legislation could lead to companies facing prosecution for breach of their duty in areas not previously considered. An example of this could be a company’s failure to ensure its employees’ cars are kept in a roadworthy condition when being used in the course of their employment, even in cases when employees are using their own cars.

"Add to this a general increase in claims from other regulators, employees, shareholders, investors and creditors and it is easy to understand why many UK companies and their directors are becoming more nervous. Indeed, a recent Hiscox survey of small to medium sized companies in the UK revealed that seven out of ten believed that they are more likely to be subjected to a frivolous legal claim.

"If passed, the Act will be another worry to add to the list of complex concerns and regulations that small businesses have to contend with in today’s highly competitive environment.”