NEW sentencing guidelines introduced in 2016 for Health and Safety offences have resulted in a significant increase in fines imposed on companies and their senior managers.
Annual statistics for 2017/18 and published by the Health & Safety Executive at the end of October this year compare outcomes against 2014/15, the last full year before the new guidelines took effect. As you would expect, these do not read well for company directors, with highlights including –
* Total fines – up to £72.6 million from £19 million
* 45 cases where fines were above £500,000, against five in 2014/15
* Average fines for duty holders increased from £29,000 to £147,000.
There was a 95 per cent prosecution success rate in 2017/18. More information about the new guidelines are included in my article, Sentencing Guidelines Revised (BT – May 2016).
Fines are just the tip of the iceberg. Should the HSE investigate following an accident or other event, companies and managers will need expert representation. If prosecuted, there is the risk of a custodial sentence as well as a large fine; 15 per cent of prosecutions resulted in immediate or suspended custodial sentences. As well as expensive legal defence, there is also the potential for business disruption and reputational harm.
A sound approach to health and safety management will reduce the risk of an event in the first place. However, accidents happen and having the right insurance in place for investigation, legal representation and other costs is important.
HSE investigations should not be the only concern for company directors. Directors still face personal liabilities associated with breach of fiduciary duties. A briefing published by the insurer, AIG, in June 2018 highlights other areas, such as –
* Insolvencies – rule changes in 2016 that make directors’ actions much more visible and give the Insolvency Service more time to bring disqualification proceedings
* Unfounded allegations – directors facing claims when they believe they have done nothing wrong. An emotionally fuelled and determined litigant can lead to thousands of pounds in costs, as well as the diversion of management time
* Contract disputes – an increase in claims for defending alleged breach of contract. With global procurement on the rise, there is also an international element to this.
The briefing also mentions the increase in management liability defence costs. This increase results from more digital documents and need for specialist eDisclosure experts, and a trend towards use of barristers for legal opinions and drafting documents.
We live in an increasingly regulated and litigious business environment. Make a mistake and the financial costs can be ruinous both for individuals and their companies. The need for insurance against these costs is more important than ever. However, beware that insurance covers provided by insurers vary and it is important to understand what is and is not insured.
For more information, or an initial and free consultation, contact Simon Mitchell, Account Director, Towergate Insurance, Northampton 01604 887325, email .
Simon is a Chartered Insurance Broker with more than 30 years’ experience and a wide range of knowledge about insurance for business. This includes specialist advice about emerging risks such as flooding, environmental, cyber-crime and terrorism.