Important notice

Although the content of this article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.


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The threat of negligence

Stackhouse Poland explains how legal actions may be brought against companies for a variety of reasons ranging from allegations of professional negligence resulting in a financial loss to alleged liability for injury/illness or for loss of or damage to property.

The threat of negligence

Businesses have been routinely pursued for negligence for many years and insurance for these liabilities has been commonplace since Employers’ Liability was made mandatory in 1969. However, whilst the business may be protected for costs and awards resulting from an allegation of loss suffered by an employee or third party, the directors may not.

It may surprise you to know that “Directors” and “Officers” (anyone in a managerial or supervisory role) of a business may be pursued personally for a variety of reasons, but actions most commonly arise from one of three main areas:

  • Alleged breach of health and safety policy
  • Allegations of financial mismanagement
  • Employment Law related matters.

Changes in the civil justice landscape in recent years have sought to speed the process of handling small negligence claims and this has in turn led to an increase in litigation. The most obvious solution is to take out an insurance policy to mitigate an individual’s exposure.

However, many businesses are not aware that Directors and Officers’ Liability insurance is available and that this will provide cover for the costs of an awards arising from any allegation brought against any past, present or future director or officers. Directors and Officers Liability (D&O) is an important protection as it protects the personal wealth of the individuals.

Claims can be brought by anyone and the most common claims relate to allegations of Employment Law failings such as:

  • Bullying
  • Harassment
  • Discrimination
  • Failure to promote/recruit

The liabilities of directors can be significant, and include the extreme such as corporate manslaughter. The high-profile action, brought under the Corporate Manslaughter and Corporate Homicide Act 2007, against Cotswold Geotechnical Group in September 2008 serves to highlight that this is a real threat. In 2008, geologist Alexander Wright died when an unsupported trial pit he was working in alone caved in at a site in Gloucestershire. Director Peter Eaton was prosecuted under the Act and charged with the unlawful killing by gross negligence.

 

The company was fined £380,000. The judge, Mr Justice Field, described the company’s gross breach of its duty to Mr Wright as a “grave offence”. The prosecution was the first under the Act.


Your St. James’s Place Partner can introduce you to Stackhouse Poland which is authorised and regulated by the Financial Conduct Authority and with a breadth of knowledge and expertise relating to insurance matters spanning several business sectors, are well placed to give clients advice on how to insure themselves in line with both the law and the risks facing them.