Directors & Officers Liability -Example

An example of why you need to consider Directors & Officers Liability

A worker was tragically killed when the dumper truck he was driving tipped over and he was buried by the spoil it was carrying. Two companies involved in the project, along with the managing director of one of those companies, were prosecuted under the Health and Safety at Work Etc. Act 1974.

The first company was found guilty of failing to "ensure, so far as reasonably practicable, the health and safety" of its employee, the deceased. The second company was found guilty of failing to "conduct its undertaking in such a way as to ensure, so far as reasonably practicable, that persons not in its employment ... are not exposed to to risks to their health and safety".

The managing director of the second company was fined £75,000 on the grounds that "through his connivance, consent or neglect", he had caused the guilt of the second company.

All three pursued expensive,  unsuccessful appeals all the way to the House of Lords, which gave its decision in December 2008.

The alarming message for company directors is that, although the cause of the accident was never established, the word "ensure" in the Act's provisions meant that the fact of the accident put the burden of proof on the companies to show that everything reasonably practicable had been done to ensure safety. Not was it shown precisely what the managing director (who declined to give evidence) had done wrong, but the House of Lords said the fact that he was on site and directly in control of the works meant that the jury was justified in inferring that he was guilty of connivance or neglect causing the second company's breach.

Overall the court proceedings lasted almost six years since the accident. Knowing that a workplace accident can expose directors to a long period of anxiety and hefty fines (which insurance is not allowed to pay), it is comforting to know that a directors and officers liability policy can cover the huge costs incurred in defending such accusations.