The news that the number of corporate manslaughter cases opened by the Crown Prosecution Service (CPS) has risen 40% from 45 in 2011 to 63 in 2012 (according to recent figures published by law firm Pinsent Masons) should perhaps act as a spur or reminder to check out the D&O coverage issues associated with this risk. First though, it may be worth reflecting on exactly what risks we have in mind.
Unlikely Risks for Directors and Officers
At one level the risks seem minimal. There have only been three convictions since the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007, and it will be remembered that the Act makes no provision for the prosecution of individual directors in any event.
Instead it enables prosecutions to be brought against large and small sized companies for deaths arising from management failures that constituted a gross breach of a duty of care. The law relating to individual responsibility for causing death has not been changed by the Act.
That said there is a risk that individual directors will be prosecuted alongside the company for gross negligence manslaughter. A recent example of this is the decision by the Crown Prosecution Service to prosecute the manager of Gleision Colliery on 4 charges of gross negligence manslaughter together with 4 charges of corporate manslaughter against MNS Mining Ltd after 4 men died when they became trapped in the mine when it flooded in September 2012. The first court appearance took place on 1st February 2013.
More Likely Risks for Directors and Officers
The more realistic threat for individual directors is that they will find themselves called to account for the adequacy of the company’s health and safety procedures in the context of an investigation launched either by the health and safety executive or the police in the aftermath of a serous accident. This is where the coverage position on many D&O policies starts to get murky.
The problems often relate to establishing the trigger for cover. Many D&O policies contain so-called corporate manslaughter extensions, but the majority of these provide cover only for defence costs in connection with prosecutions for “corporate manslaughter”. In other words they do not provide cover for the crucial and earlier investigation phase of the process.
To make matters worse the policies often define this term by reference to the Act or similar legislation anywhere in the world. Since the Act doesn’t itself provide for prosecutions against individuals, a definition in these terms isn’t great. Moreover, since the laws in different countries on this question are rarely “similar” to those of the UK a definition in these terms is especially unhelpful.
Finally, by way of traps for the unwary is the bodily injury and death exclusion which sometimes is not dovetailed with the corporate manslaughter extension making the policy intent ambiguous at best.
Are You Covered?
Here are some D&O coverage tips to watch for:
- Does the policy provide any cover for investigations relating to bodily injury or death?
- Is the cover for defence costs sub limited (ie worth less than the full limit of the policy) ?
- Is the definition of corporate manslaughter accurate and sufficiently broad to pick up any incident giving rise to bodily injury or death?
- Is any reference to relevant legislation “ anywhere in the world” couched in broad enough terms?
- Has adequate thought been given to the interaction between any affirmative cover offered in this area and the relevant exclusion which is invariably found in these policies?
- Have you considered and “all risks approach” to this question which addresses all these problems by not seeking to be prescriptive as to the cover offered whilst making it clear that all defence costs and investigation costs are covered up to the full limit whether the incident concerns bodily injury or death or not?
Willis and Allen & Overy are running survey of directors and officers to discover their top concerns in 2013. Please spare three minutes of your time to share your valuable insights. Take the survey.
FINEX will hold a seminar in London on April 17th to present the results of the survey. More details to follow.