Magazine article Risk Management

Corporate Manslaughter

Magazine article Risk Management

Corporate Manslaughter

Article excerpt

The Corporate Manslaughter and Corporate Homicide Act took effect in the United Kingdom on April 6. It defines "corporate manslaughter" (or corporate homicide in Scotland) as a legal offense in the UK--that is, organizations become liable for incidents of death in the workplace resulting from breaches of the general duty of care. While individuals themselves will continue to be subject to standard criminal prosecution under existing common law manslaughter legislation, the new act places the onus on the organization itself. What does this mean to U.S. clients with operations insured in the UK? And what action, if any, needs to be taken?

With the new act, UK courts will be closely examining management systems and practices across the entire organization in an attempt to provide a more effective means to prosecute blatant corporate failures to properly manage health and safety. But here is the catch: to find an organization guilty under the act, the prosecution will need to show that the failure came from "senior management"--persons playing significant roles in the organization. Gross management failures resulting in death are liable under the act, and if found guilty, penalties can include an unlimited fine. The intent here is that companies take health and safety issues seriously, and show proper accountability when serious management failings lead to people being killed on the job.

According to a briefing note prepared by UK law firm Kennedys, the main components of the new act that differentiate it from the past are two definitions:

1) Organizations. The new offense will apply to a much wider group of organizations, including corporations, specified government departments, police forces and partnerships.

2) Senior management. The act now concerns those who play significant roles in decision-making regarding how the organization's activities should be managed or organized, or the actual management of those activities.

"Previously under common law, manslaughter cases against corporations were hard to prove, and as a result, police were hesitant to investigate them." says Daniel McShee, the partner at Kennedys who wrote the briefing note. "The act makes it easier, and if police do not investigate more cases, they will be subject to scrutiny." McShee believes that the main issue for insurers and their insureds will be increased investigative expenses, which in the UK typically erode local limits for all losses. …

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