Management safety processes under scrutiny

After almost 10 years of lobbying, corporate management can be held accountable for deaths proved to have been caused by breaching their duty of care.

From 6 April 2008 many organisations will have to reconsider their attitude to health and safety when the Corporate Manslaughter & Corporate Homicide Bill becomes law.

It is also a prime opportunity for insurers to help insureds by offering real added-value to their insureds.

The main focus of the Act is to establish the grounds upon which an organisation, rather than an individual, can be found guilty of corporate manslaughter (corporate homicide in Scotland).

Moving away from the need for a guilty individual “controlling mind” to be identified, an organisation will be guilty of the offence if the way in which its activities are managed or organised by its senior management amounts to a gross breach of the duty of care and that breach results in the person’s death.

The prospect of individual liability under the Act is specifically excluded.

The intention behind the identification of the activities of “senior management” is not to let individual directors off the hook. Rather it encourages companies to adopt an approach to health and safety that permeates the organisation rather than being concentrated in a single department or individual.

All company directors will now be required to take an active interest in these matters and to ensure that health and safety is a prime consideration in their business.

If they fail in this respect, and a fatal accident arises from a “gross breach” of their duty of care, they could end up in court.

Breach of a duty of care is to be regarded as “gross” if the organisation’s conduct falls “far below what can reasonably be expected of the organisation in the circumstances”.

Factors for consideration include: whether the organisation failed to comply with any relevant health and safety legislation and if it did, how serious a failure that was and how much of a risk of death it posed.

Another factor is the extent of the organisation’s compliance with relevant health and safety guidance (undefined in any way) and whether the evidence shows that there were “…attitudes, policies, systems or accepted practices within the organisation that were likely to encourage any such failure”.

In addition to an unlimited fine, the Act introduces a power for the courts to impose a remedial order on a convicted organisation to force it to resolve any management failure that may have been a cause of death.

The Home Office anticipates that the new Act will result in the number of prosecutions for the offence rising from the current one or two a year to around 13.

The cost of prosecuting and defending these actions will inevitably rise from current levels given that the the investigation required to identify the “management and organisation of activities” and “attitudes, policies, systems or accepted practices within the organisation” seems likely to require a great deal of time and effort.

This is not to mention disruption to the day-to-day working of the organisation in question during the period of investigation.

It is also arguable that companies will more easily be found guilty of the offence when the conviction of a director with direct responsibility for the breach of duty is no longer a prerequisite to the conviction of the company for the offence of manslaughter.

Fines are likely to be set at a level at least equal to those currently levied on organisations found guilty of breaches of the Health & Safety At Work Act that result in a fatality.

But perhaps of greater concern is the stigma likely to be attached to an organisation found guilty of the new offence and the potential consequent impact on its reputation, from the level of its insurance premiums to its ability to hire staff and tender for work.

The new legislation highlights the importance of addressing health and safety issues at a high level within any organisation

All directors and other “senior managers” must ensure as best they can that their organisation has in place a robust set of health and safety procedures, along with the appropriate structure, staff competencies, organisational culture and internal and external auditing framework to enforce and maintain them.

Senior managers must be able to demonstrate not only clearly documented safe working procedures, appropriate risk assessments, relevant training and so on, but also that these processes were stringently applied across the organisation and regularly reviewed to ensure that they were at all times a good fit to changing circumstances.

That is to say that they are “managing the activities” of the organisation as the Act implies.

Evidence will be required of these internal reviews and it may also prove necessary periodically to call upon the services of external health and safety and risk management assessors in order to benchmark an organisation’s endeavours against best practice.

Many liability insurers are able to provide such a service to their clients already.

Particularly important is to ensure that these procedures are communicated to employees and other potentially affected persons in a clear and effective mannner so as to help formulate the necessary “attitudes…and accepted practices” within an organisation.

The Act also effectively requires organisations to make, and for their own sake, record every effort to keep abreast of developments in health and safety in their line of business.

Although the Act fails to define the sort of “health and safety guidance” to which an organisation might be expected to have referred, the H&SE website* provides a useful starting point, with its facility for searching by industry type or health and safety topic.

Insurers should bear in mind that organisations charged with the offence will need to co-ordinate their response at board level.

The senior executives whose management of activities will be implicated will demand the highest (and likely most expensive) quality of legal representation.

Defence of a prosecution will require investigation that mirrors, if not exceeds, the extensive nature of that conducted by the Crown Prosecution Service and with few organisations likely to be

willing to plead guilty before a full hearing, at least in the early days when there is little case law to set the appropriate standard, legal bills will be high.

Cover is likely to be afforded by employers’ and public liability policies without any inner costs limit and, as such, insurers in those areas may take an initial hit on claims’ costs.

The good news is that the explanatory notes to the Bill state: “There is no question of liability where the management of an activity includes reasonable safeguards and a death nonetheless occurs”.

With the provisions of the Act not due to come into force until April

of next year there is time yet for organisations to address any shortcomings in their governance

structure, policies and systems, and for insurers to work with them to rectify these.

It must be recognised, however, that company-wide attitudes and accepted practices may take more time to change.