Workplace incidents and fatalities: insurance arrangements

Fines exceeding several hundreds of thousands or even millions of pounds, imposed following successful prosecutions of organisations, are becoming more commonplace every year. Directors and senior managers are also at risk of receiving substantial fines in their personal capacity and, in the most serious cases, imprisonment.

Employers will be familiar with employers and public liability (EL&PL) insurance. This covers civil claims for personal injury compensation: both the damages payable and the legal costs associated with processing the claim. These policies may also cover the legal expenses connected with a criminal investigation and prosecution arising from the incident, and you will undoubtedly want to make use of that extra level of insurance protection if you have it.

This guide should be read in conjunction with our detailed guide Workplace incidents and fatalities: advice for UK employers.

The freedom to choose your own lawyer

If an employer is prosecuted for an offence, it is the employer and not the insurer who has to pay the fine as well as, in the majority of cases, any prosecution costs. This can be distinguished from personal injury proceedings, where the insurer generally pays the compensation as well as all the costs. It is also the employer's reputation, and not the insurer's, which is at stake.

As a consequence, where legal expenses insurance is available, the insured party has a legal right to instruct the lawyers of its choice to deal with the regulatory proceedings. This right derives from The Insurance Companies (Legal Expenses Insurance) Regulations 1990, and its application was confirmed by the Court of Appeal in December 2012 in Brown-Quinn & Others v Equity Syndicate Management Ltd & Others. In November 2013, the obligation on insurers to give insured parties the freedom to choose their own lawyers was confirmed, for the third time, by the Court of Justice of the EU.

Post-incident legal advice

Significant benefits can be obtained from getting specialist health and safety lawyers on board immediately to pro-actively advise on mitigation measures, help minimise your exposure to criminal liabilities that can arise through the investigation process and maximise the opportunities to defend subsequent criminal charges. In our detailed workplace accidents and fatalities guide, we set out some of the scenarios in which specialist legal advice should be sought.

Most insurers have arrangements in place with panel law firms who are specialists in personal injury claims, as this is the primary purpose of EL&PL insurance. Following an incident, your insurer may suggest that one of these firms should also deal with any regulatory proceedings.

You may be happy to go along with this suggestion, but your insurer does not have the right to insist on the appointment of one of its panel firms, or to impose a panel firm on you. Remember that it is your legal right to choose your own lawyers, who are experts in dealing with criminal regulatory proceedings, to defend such prosecutions robustly; to limit any potential damage to your reputation; and to ensure that steps are taken to avoid any potential recurrence.

If you want to rely on your right to choose, it would be prudent to agree with your insurers in advance which solicitors you intend to appoint in the event of a health and safety investigation or prosecution. Otherwise, you should notify your insurer as soon as possible following an incident, so that you can resolve any issues about representation at the outset.