What's the issue?
An employee was injured in a work accident. The employer's insurance didn't cover the accident. Then the company went bust - so it had no money of its own to meet the employee's claim.
The employee tried to go after the company's only director for damages. He said the director should pay up because the director had breached the UK law that requires employers to have proper insurance in place.
That law (called The Employers' Liability (Compulsory Insurance) Act 1969) says it's a criminal offence for an employer not to have insurance in place. Directors of corporate employers are also on the hook if the company's failure to insure was due to their neglect.
The offence carries fines of up to £2,500 a day. Fines, of course, don't get paid over to injured employees.
So the issue was whether criminal liability was the only consequence of breach of the 1969 Act. Or could the injured employee also sue the director personally for damages? The 1969 Act didn't say one way or the other.
The result
The case went all the way to our highest court, the Supreme Court. It decided (but only by a 3:2 majority) that the director was not liable.
The detail
The employee faced an uphill struggle on this one. Normally, if a statute provides that failure to do something is a criminal offence, you can't go after the offender for another kind of remedy likedamages.
But there are exceptions to this general rule and the employee was hoping that the court would decide that his case fell within one of those.
The judges in the Supreme Court disagreed about the approach to this question. Two took the view that the 1969 Act was aimed at protecting employees from just this kind of situation. But this view did not prevail.
The majority of the judges noted that:
- The statutory duty to insure rests on the corporate employer. No duty to insure is placed on a director, let alone any civil liability for failure to do so.
- Parliament had imposed a specific criminal penalty on a director who was responsible for a failure to insure. This penalty was linked to the criminal liability of the company. This, however, was not enough to make the director personally liable for damages.
- The language in the 1969 Act was specifically directed at criminal liability. The judges thought it unlikely that Parliament had intended to impose a more general liability.
Conclusion
Directors will not be personally liable for damages under the 1969 Act even if it is their fault that their companies have failed to provide adequate insurance.
While directors may breathe a sigh of relief at this decision, we should not forget that directors may face criminal prosecution if they are responsible for their company's failure to insure properly.
From an injured employee's perspective, however, this will be of little comfort where the company has few or no financial resources to meet a personal injury claim.
Case: Campbell v Gordon [2016] UKSC 38.
Related reference: New Orleans car accident lawyer tips how to file a personal injury claim.
Contributor
In-House Counsel
