Manoeuvres through manslaughter

post-080710-supp-04-gif

The Corporate Manslaughter Act has forced risk management high onto boardroom agendas as fleet firms find themselves suddenly open to prosecution. Lynn Rouse reports from a recent roundtable

When the Corporate Manslaughter and Corporate Homicide Act came into force in April, several commentators warned of the heightened exposure faced by commercial fleets to prosecution. This is because employers' responsibility for health and safety in the workplace extends to occupational driving. But how prepared are fleet managers to mitigate this risk and respond should the worst happen?

Post gathered experts from the insurance and legal industries, in conjunction with Equity Red Star, to identify the current level of legislative awareness among insureds, pinpoint what fleet managers can do to reduce the risks and detail how they can prepare the strongest defence.

David Grant, head of sales and marketing with Equity, kicked off the debate by tackling insureds' awareness levels. "The feedback from our brokers is that a lot more needs to be done. Some fleet managers are aware of the need for good risk management but I don't think they really understand the full implications of how this law can affect them, particularly with regard to their individual positions as company directors."

But Andy Price, Zurich's motor fleet practice leader, was more upbeat about the new Act's effect on fleet customers. "This issue has definitely gone up the agenda. There is now an understanding at companies' lower levels that this needs to be managed for different reasons, including legislative ones. So the fleet manager, the health and safety manager, and the insurance and risk manager are all well aware but have been frustrated by not being able to get the message through to the board. Since the Act, however, the number of people who want to talk to us has increased significantly."

Kwik-Fit Fleet launched a survey at the end of April, in conjunction with Roadsafe, to find out what actions senior managers with responsibility for fleet operations have taken to reduce their risk exposure. Roadsafe director Adrian Walsh was quoted as saying the majority of companies in the UK, particularly small to medium-sized enterprises, "continue to turn a blind eye to their legal responsibilities". So is that the experience of others in the market?

"I wouldn't say that," responded Mr Grant, "there are concerns across the board, not just in the SME market. Too many firms still see risk management as a cost to their business, rather than part of their normal business responsibilities. We need to make sure attitudes change to view this instead as something that could save them money in the long run."

But is the cost argument likely to gain momentum in the current economic climate? Roger Ball, head of commercial motor and motor trade at Allianz Insurance, replied: "With any legal-based issue, people always believe it won't happen to them and I don't think that culture is going to change. My fear is that the people who fundamentally support risk management, the people we interact with, are the ones interested in new legislation like this. So the key question is how we reach those people who are not interested and culturally win them round to support this approach. That is quite a challenge."

Andy Hopkin, associate at law firm Browne Jacobson, said he thought guidance supplied by the Health and Safety Executive could help counter this. "It was published well before the new law in April but there is still a lack of knowledge about it within companies. Among other things this guidance suggests that adopting safe working practices will result in business efficiency and, therefore, cost savings. Instead of simply pointing people to the potential penalties, firms could look at this guidance and their business and see how improving safety is going to reduce costs. That is a persuasive method and one blessed by the HSE."

Kathy Dwyer, partner at Davies Lavery, agreed the guidance provides a strong starting point. "The first benefit mentioned is not reducing the risk of a corporate manslaughter charge, but aspects such as suffering fewer days lost due to injury, reduced risk of work-related ill health, improved morale, fewer vehicles off the road for repair, fewer missed orders and business opportunities through reduced risk of losing the goodwill of customers. I think it is well presented; it tries to open the mind and generate the right attitude."

Mr Price added that the 'driving for better business' government-sponsored initiative is specifically looking for business champions who can share what they have done and achieved; for example, in terms of collision reductions. "This is also a relatively independent way of getting the message out and a good resource for the SME market."

But which is the easier 'sell' - the threat of being found guilty of corporate manslaughter with all the commensurate fines and reputational risk or the potential financial benefits of effective fleet management through reduced accident frequency?

"Primarily the financial relationship," answered Mr Ball. "I am not devaluing the legal issues, but most people relate to the financials. The sad fact is many don't understand that for every pound of insured loss, there is any multiple - from figures of 18 up to 36 times - for the uninsured costs. So, frankly, it is well worth investing in risk management."

Mr Hopkin then pointed to the personal difficulties that senior individuals being brought into the investigation could face in order for a conviction under the new Act to be founded. "The prosecution is going to have to demonstrate a gross breach; they are going to have to ensure a jury sees that senior management - even though they may not be defendants - have failed in a very significant way. Likewise the Health and Safety at Work Act, by reference to workplaces, brings in personal offences under sections 7 and 37. So that is also quite persuasive."

Everyone agreed brokers have a large role to play, particularly in the SME market, to help protect their clients' balance sheets through good risk management - and many have picked up on this by going to talk to them, not just about insurance but also how they can protect and benefit the business as a whole.

It has been suggested that a claim for corporate manslaughter may not be seen for several years, so is there a danger interest will tail off until a big case hits the headlines?

"That was the point I was going to make, particularly among SMEs where the commercial considerations are so relevant in terms of implementation," said Kate Archer, partner at Beachcroft. "There is a 'wait and see' approach from companies along with many just hoping they are not among the first."

Referring to a survey by the RAC, which found 16% of pool car fleets are un-roadworthy, guests were asked whether this area is at risk of being overlooked.

Mr Price was concerned that too much focus may be placed on the vehicle. "The reality is that pool vehicle maintenance is responsible for very few crashes; many are due to human error. It is the management systems that a business has in place that have much more influence over driver behaviour. The reason emphasis is placed on the vehicle is because it is easier to manage than making sure the culture of the business is right in the first place. Yet this is where the biggest gains lie for any business."

Referring back to the Act, Mr Hopkin said the jury may consider company attitude. "The prosecution will give them a flavour to suggest the attitude was poor. Companies should want to instill a safety culture so that, if the police and HSE come in, they immediately see the company attitude is a good one. Hopefully they will then take the view that there is no reason to commence criminal proceedings against the company, despite the fatality."

Is it important to be incentivising fleet drivers? "It is a combination of incentives but also having the mechanisms to discipline those who don't comply with procedures," said Mr Hopkin. "You want to ensure that where breaches are identified, there is an audit trail showing steps were taken."

"It must come from the top," stressed Mr Grant. "To get the culture right, chief executive officers and senior directors must drive this and make sure it filters down through the organisation."

"That is absolutely key," agreed Mr Price. "You can have the best policies and procedures in the world but if you ban phone use and the managing director is then seen having a phone conversation on the way out of the car park, are these going to be taken seriously?"

Andy Keane, UK motor portfolio manager at Brit Insurance, added that these processes must also be kept alive. "They must be reviewable and continually used to make sure they are effective. It all comes back to education," he said. "There is so much guidance out there but if you are a small operator, where do you start? This is where we as insurers and brokers, come into play: to cut through the fog and explain it is pretty simple. I accept there are resource issues but it is not a massive investment to get the basics into businesses."

So should the worst happen and there is a fatality caused by a fleet driver, what should companies do on day one in practical terms?

"The key is to manage the investigation," responded Mr Hopkin. "The audit trail will be essential, so make sure you can quickly gather together those documents on which you would rely to demonstrate your health and safety systems. Conflict is another area that will be increasingly focused on from a legal perspective."

Although lawyers are first involved at the behest of the company, he explained that the police will move relatively quickly, from statement taking to interviewing under caution. "And the people they are speaking to, in order to potentially build a case against the company, are the employees. Therefore, solicitors must exercise care when considering whether they can properly represent the interests of the company and the interests of the employee. For example, what if the employee says: 'I have been saying for weeks there is a problem - here is an e-mail to that effect'; can we properly sit in that person's interview, representing the company?"

He said some insurers have taken this on board and have provided names of other panel firms where company lawyers can refer instructions should conflict arise.

Ms Archer agreed that conflict is now an important consideration. "We regularly liaise with other panel firms that our insurers use and will pass on instructions if appropriate."

So is separate legal representation essential? And, if so, would the insurer have to pay for it? "There is a significant funding issue," acknowledged Mr Hopkin, because of the potential for a multitude of parties to need to consider the same documents to defend those they may have to represent.

Mr Keane conceded that the insurance industry may not have addressed this issue sufficiently. "Generally most of us have endorsed our policies and extended cover for defence costs - it's another add-on, a freebie for want of a better word. Could we have managed that better? If we say 'you are getting the cover but there is a price' people might start to think about the seriousness of the issue."

So rather than trying to cover these legal defence costs under the commercial fleet policy, should insurers be encouraging customers to buy stand-alone commercial legal expenses cover that could cater for it better?

"My view is yes," said John Josiah, underwriter for Equity. "Prosecution for this won't necessarily flow from a motor accident, there are lots of other circumstances that could arise. Presumably every area of insurance where corporate manslaughter can arise is having to endorse cover. I also think brokers have missed an opportunity to sell something more, something covering all probabilities, that would cater for this so we can all sleep easier."

Telematic technology was tackled next and guests asked whether it could be worse to capture data, only to fail to act on it.

"If you identify a habitual speeder from telematic data, don't do anything about it and then that person has a collision in which speed is an implication, you have made a rod for your own back," commented Mr Price.

Would the prosecution actively look to use this data against the company?

Ms Dwyer said that it may depend on why a firm installed telematics. "It could be that your primary reason for installation was to improve fuel efficiency, not risk management. But if you had a risk manager that was looking at the data and not doing acting on it, that is different. Your intention is different because you have a process to manage risk, but have ignored it."

Mr Hopkin added: "The killer documents would be the health and safety minutes of directors' meetings if, for example, the same specific problems are thrown up every quarter. Those are the sort of documents the prosecution will seize upon."

As the discussion drew to an end, Mr Price summarised: "The Corporate Manslaughter Act is going to do a very good job of getting risk management higher on the corporate agenda but ultimately it will be the financial arguments that win the day with customers looking at the uninsured losses associated with it. Once they understand that, then there is a business driver to do something about it."

Mr Josiah strongly agreed: "The new legal requirements have opened the door - insurers should see this as a prime opportunity to improve risk."

  • LinkedIn  
  • Save this article
  • Print this page  

You need to sign in to use this feature. If you don’t have an Insurance Post account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: