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November 2018 Newsletter

Posted on Tuesday 27th Nov 2018

Acton Jennings’ Indemnity Cover for Clients

While all our clients have the benefit of legal indemnity insurance cover, many never have call to use it. That is the case of course, with most personal and other business insurance policies. What cover is available depends on the type of contract you have with us. Two recent cases illustrate the distinctions in practical terms but also show the value of having insurance.

The widely reported failure by Wm. Morrisons Supermarkets plc to overturn a High Court ruling that it is liable for a data breach committed maliciously by a disgruntled employee provides an interesting way to look at one aspect of  insurance cover available to some of our clients.

For those unaware of the facts: a data security breach occurred in 2014 when Mr Skelton, then a senior internal auditor based at the retailer’s headquarters, posted online the payroll data of nearly 100,000 employees, including names, addresses, bank account details and salaries. He also sent the data several newspapers. Skelton received an eight year prison sentence in 2015 for fraud, securing unauthorised access to computer material and disclosing personal data. Nearly 6000 employees brought an action against their employer. Morrisons was subsequently held to be vicariously liable. 

Morrisons’ appeal was based on the argument that they should not have bear responsibility for the criminal actions of a very dissatisfied employee. Indeed, they have indicated that they will appeal to the Supreme, Court. If they are again unsuccessful, they will be required to pay compensation to the many victims of Skelton for their “upset and distress”. How does all this relate to our indemnity policy?

For H&S service clients and for combined service clients, under their indemnity policy, the legal costs to defend civil actions brought for compensation arising from data protection breaches are paid, provided that our client is registered with the Information Commissioner and has in place a complaints process to investigate complaints and has engaged with that process. This includes an offer of suitable redress where there has been a breach. 

In the Morrisons’ case Insurers would need to consider whether Morrisons’ failure to offer redress to the data subjects as required by the policy, but rather to dispute the claim (which for perfectly understandable reasons they chose to do) would put them in breach of the policy requirement. Only if insurers were satisfied that Morrisons had offered redress would the claim have been covered.

As the Morrison’s claims originate from the same cause, a single limit of indemnity would apply for all claims – i.e. £100,000 (standard). Legal costs incurred in excess of that limit would not be payable under the terms of the policy.

Our 2018 policy wording does not pay compensation that the data controller is ordered to pay – just legal costs. Regarding legal costs, where a liability policy provided dual insurance, our insurers would expect to pay a proportionate share. Damages would more correctly be covered by a liability policy.


Ground-breaking Unfair Dismissal Case

Another case where cover may have been available under our legal indemnity insurance is International Petroleum Ltd & Ors v Osipov & Ors UKEAT/0058/17/DA.

The importance of this very recent, lengthy and complicated judgment cannot be overstated.

Mr Osipov brought a number of claims against his former employer, International Petroleum Limited (IPL), of which he was CEO, and against two non-executive directors, Mr Sage and Mr Timis. The claim was for having been subjected to a number of detriments after making a series of protected disclosures.

Mr Osipov brought a claim for automatically unfair dismissal against IPL and detriment claims against IPL and the two non-executive directors. The detriment claim against the two non-executive directors included a claim that Mr Osipov was dismissed. He suffered a detriment by their dismissing him. Mr Osipov was successful in his claim.

Mr Sage and Mr Timis appealed on the basis that any compensation for a dismissal related detriment could only be pursued against IPL the Company and not against them personally as individuals. The Employment Appeal Tribunal rejected that argument and found that claims against individuals could include losses flowing from dismissal where the claimant had been subject to a relevant detriment by those individuals.

This was upheld by the Court of Appeal which confirmed that an individual whistleblower who was dismissed after making a protected disclosure could bring claims against the individuals who took the decision to dismiss. This is a huge decision which could have significant financial implications for managers occupying senior positions like those of Sage and Timis.

Normally, the liability of an individual is of little significance because the employer usually but not always pays that award. In the IPL case, however, the employer was practically insolvent. Liability to pay the award, which was substantial, would fall on the individuals themselves. Where employers, perhaps with limited capital resources, are unable or unwilling to pay the award, senior individuals within the organisation may themselves be liable to pay it.

Indemnity insurance, for HR service clients and for combined service clients, covers legal representation at employment tribunal, loss of earnings that cannot be recovered from tribunal and any award made against our client, where our advice has been sought and followed. This much is well-known. However, because the policy provides cover where “a dispute [arises] between you and your employee, ex-employee, or a prospective employee, arising from a breach or an alleged breach of their;

a)            contract of service with you

b)            related legal rights.”

It also provides protection for individuals as well as for the company: (b) would bring whistleblowing claims within the ambit of the policy. Our insurers will no doubt need to consider the implications of the IPL judgment because for the first time directors have been held liable for the unfair dismissal of an employee where whistleblowing was the sole or principal reason for dismissal.    Cover is, of course,  subject to the indemnity limit of £100,000: Unfortunately for the appellants, in the IPL case the employment tribunal  awarded Osipov damages of more than £1.7m  and the EAT, which heard the first appeal last year,  upheld that  ruling and increased the payout to £2m.

If you would like to discuss your service needs with us, please ring the office on 01924 416888.


HSE Crackdown on Construction Firms

Construction firms across Great Britain will be targeted on their health standards the Health and Safety Executive (HSE) has announced.

These inspections will be the first time the regulator has targeted the industry with a specific focus on respiratory risks and occupational lung disease; looking at the measures businesses have in place to protect their workers’ lungs from the likes of asbestos, silica and wood dust.

Inspectors will be visiting construction businesses and sites across the country and will specifically be looking for evidence of construction workers knowing the risks, planning their work and using the right controls, and if necessary, will use enforcement to ensure people are protected.

HSE’s Peter Baker, chief inspector of construction said:

“Around 100 times as many workers die from diseases caused or made worse by their work, than are killed in construction accidents” Annually, work-related cancers, mainly linked to asbestos and silica, are estimated to kill 3,500 people from the industry. Thousands of others suffer life-changing illnesses from their work. Not all lung diseases take years to develop. Some, like acute silicosis or occupational asthma, can occur more quickly.

“As a result, we’ve launched this inspection initiative to find out what exactly businesses in the construction industry are doing today to protect their workers’ health, particularly when it comes to exposure to dust and damage to lungs".

“We want construction workers to be aware of the risks associated with the activities they carry out on a daily basis; be conscious of the fact their work may create hazardous dust; and consider how this could affect their health, in some cases irreversibly. We want businesses and their workers to think of the job from start to finish and avoid creating dust or disturbing asbestos by working in different ways. We want to see construction firms encouraging their workers to firstly keep the dust down and wear the right mask and clothing.

“Ultimately, we want construction workers’ lungs to be protected from ill health, so they can go home healthy to their families and enjoy long careers in this important industry.”

Our construction clients will be aware of the importance of having the relevant type of asbestos survey completed before any work is undertaken that involves breaking into walls, disturbing fixed materials, cutting into, opening up or dismantling structures etc. Inspectors are also likely to look at activities which generate dust such as cutting with a Stihl saw or repetitive wood cutting on site table saws, especially if this involves cutting hardwoods. Clearly the provision of adequate and suitable RPE and enforcing the wearing of it will be one issue that inspectors will focus on, but protective equipment is considered the last line of protection and other control measures may be required, such as dust suppression or portable LEV.

Remember that HSE Inspectors charge for their time under Fees for Intervention (FFI). Acton Jennings’ construction clients who have taken our H&S safety support services have cover in place to pay the FFI invoice.

If you have an occupational hygiene problem including dealing with construction dust, please ring our office on 01924 416888. 

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