Directors’ and Officers’ Insurance

Directors’ and Officers’ Insurance D&OI, covers company directors, officers and senior managers against claims arising from the decisions and actions taken as they manage a business. Any director or company officer will have ultimate responsibility for the business and its employees.

Directors of a “limited liability” company are not necessarily covered for legal actions.  Directors' personal liabilities are unlimited and in the course of carrying out everyday duties for a company, directors are exposing themselves personally to lawsuits, investigations and criminal prosecutions. Directors are personally liable to defend any claims and their personal assets are potentially at risk.

Directors have a number of duties including the common law duty to act in the same manner as “the care of an ordinary man would take in the same circumstance on his own behalf”.  The law expects a senior manager to be experienced, reliable and honest.  Directors also have a fiduciary duty to act in good faith and in the best interest of the company.  There are also statutory legal duties outlined in many laws including Companies Act 1985, Insolvency Act 1986, The Bribery Act 2010, Environmental Protection Act 1990 and the Health and Safety at Work Act 1974.

D&OI may cover you in many cases including financial misconduct, health and safety issues, employment liability and criminal activity and may pay legal costs and expenses and any civil damages awarded. Shareholders, employees, creditors, regulators, suppliers and customers may all take action against you.

 
If you’d like to know more about D&OI, need to renew or revise your current policy, please get in touch.

Corporate Manslaughter

The Corporate Manslaughter & Homicide Act 2007 came into force on 6 April 2008.  This Act was introduced to make it easier to prosecute business organisations for manslaughter.  Previously to this legalisation organisations could only be found guilty of corporate manslaughter if, under common law, the “controlling mind” could be identified.  This meant the offence had to be attributable to a senior individual in the company.  Under “common law” a senior individual could be prosecuted (and still can be) for the offence of gross negligence manslaughter.

The first case was in February 2011 when Cotswold Geotechnical was found guilty of the corporate manslaughter of Alexander Wright in September 2008.  Mr Wright died following the collapse of a 3.8 metre deep, unsupported, trial pit.  He died of traumatic asphyxia as the weight of soil crushed his body.  He was 27 years old. Cotswold Geotechnical was fined £385,000.

In May 2012, following Northern Ireland’s first corporate manslaughter conviction, JMW Farms Ltd was fined £187,500.  Robert Wilson was struck by a metal bin falling from a forklift truck In November 2010.  Mr Wilson suffered fatal head injuries.

The second prosecution in England is due to be heard this month.  Lion Steel Equipment Ltd has been charged following the death of Steven Berry in May 2008.  Mr Berry fell through a fragile, plastic roof at the company headquarters and died as a result of the injuries from the fall.  Three of the company directors have also been charged with gross negligence manslaughter.

The sentence for corporate manslaughter is an unlimited fine. Some companies are unlikely to be able to easily find the money and continue trading.

The associated costs of the trial can be thousands of pounds.   As company directors and officers are directly involved in these cases, Directors &Officers Insurance will, at least, cover the associated legal costs.  If you would like to know more, please give me a call on 01244 329149.

Employers’ Liability Insurance

Employers’ Liability Insurance (ELI) is compulsory.  It is a legal requirement under The Employers’ Liability (Compulsory Insurance) Act 1969.  This insurance enables you to meet the costs and compensation an employee may seek if injured or ill due because of the work they carried out.  (Injuries due to motor accidents are covered separately by your motor insurance).

Employers are responsible for the health and safety of people who work for them.  Limited companies require ELI unless only one person or close family members are employed.  The minimum cover by law is £5 million, although £10 million is often the norm these days. You must seriously consider your risks and take out appropriate cover.

It is the Health and Safety Executive (HSE) that enforces this law and can fine companies £2,500 a day for not having valid insurance.  Failure to display the certificate of insurance can lead to fines of £1,000 (the certificate can be displayed electronically).

Accidents happen as HSE bulletins constantly remind us.  Sometimes the fines imposed by the HSE seem quite low but the levels of compensation the individual received are not revealed.  A painter who fell through scaffolding and suffered permanent brain damage was awarded a lump sum of £2.4million and on going payments of £105,000 a year for life.  Similarly a manager whose injuries following an accident left him with serious disabilities received a lump sum of £5.1million.  The legal costs are additional to these sums and can also be considerable.  The NHS can also reclaim the cost of treating injured patients to all cases where personal injury compensation is paid.  The maximum charge in respect of an injury is £45,153.

These are all big numbers so it is important you are covered.  It’s easy to see how a company could become bankrupted if uninsured.  Get in touch and I’ll talk you through your company’s risks and arrange the right insurance policy for you.