Corporate manslaughter - Counting the cost of corporate manslaughter

Just over a year since The Corporate Manslaughter Act (2007) came into force, the Crown Prosecution Service has brought its first corporate manslaughter prosecution, against Cotswold Geotechnical Holdings, a small, family-run business. The prosecution of the geological survey company followed the death of an employee, Alexander Wright, a junior geologist who was crushed to death when the sides of an excavated pit collapsed while he was collecting soil samples. One of the company's directors is to face prosecution for gross-negligence manslaughter.

When the new corporate manslaughter offence was introduced last April, its primary target was organisations that were responsible for major disasters. However, as this case demonstrates, it applies to almost all organisations, regardless of size, where they are employers or occupiers or undertaking commercial activity.

The news of this first prosecution should serve as an immediate reminder for brokers to check that their employer clients review who and what is covered under their liability policies, as well as the extent of that cover.

For example, do the defence costs covers include corporate manslaughter investigations and prosecutions? Do they cover appeals against conviction or sentence? Are employees, as well as officers and directors, covered under employer's or any directors' and officers' policies should they need individual representation. Also, are the indemnity limits sufficient for this? Furthermore, are directors covered for directors' disqualification proceedings? What about professional disciplinary proceedings that may be brought following a conviction of an individual?

Under the Act, an organisation is guilty of corporate manslaughter if the way in which it manages or organises its activities causes a person's death and amounts to a gross breach of a relevant duty of care to the person that has died; a substantial part of the failure must be found at senior level. Penalties on being convicted of corporate manslaughter include an unlimited fine, which the Sentencing Advisory Panel has recommended should be linked to the company's annual turnover and range from 2.5% to 10% depending on the circumstances. In addition, the courts can make remedial orders to rectify the failures and can impose publicity orders, whereby businesses must advertise their conviction, including the offence and the fine. This could be on television, in the newspapers or on the company's website and so such adverse publicity may be more damaging than the fine itself.

Since April 2008, the Health and Safety Executive has recorded 228 fatal accidents at work, so it is likely that other corporate manslaughter investigations are currently underway that might result in prosecution. In the highly charged atmosphere that follows a major disaster, employers and directors need to know that they have the appropriate insurances in place.

Brokers will also want to ensure that clients take the opportunity to re-examine and ensure the adequacy and implementation of their management systems and health and safety procedures.

Andrew Stokes, partner and head of the safety, health and environment group, Beachcroft.