Essential: All Party Group recommends extending Health & Safety Fees for Intervention

I recently blogged about protection against payment of Health & Safety Executive (HSE) Fees for Intervention (FFI) for businesses regulated by HSE available under our Commercial suite of products. (“Covered: health & Safety Executive Fees for Intervention”, posted 8 October). It seems that the Government has realised that local authorities might also benefit, if their health & Safety enforcement teams were able to claw back administrative costs. 

The All-Party Parliamentary Group on Occupational Safety and Health (APPGOSH) has published a report, "Local Authorities and Health and Safety"  which challenges the assumption that workplaces which are regulated by local authorities (as opposed to the HSE), such as offices, shops, warehouses, and pubs and clubs, necessarily carry a lower health and safety risk. The report points to the high rates of injury and illness in warehouses, and of occupational disease in offices (stress), supermarkets (musculoskeletal disorders), and pubs (violence). 

Report recommendations include:

• placing more emphasis during inspections on health, rather than just safety;
• re-introducing compulsory pro-active inspection for all new premises or businesses regulated by the local authorities
• extending fees for intervention (FFI) to local authority-regulated activities.

FFI was introduced in October 2012, allowing the Health & Safety Executive to charge businesses in the sectors that it regulates for the costs of regulation at a rate of £129 per hour. Further information about FFI can be found in my earlier blog. 

Covered: Health & Safety Executive Fees for Intervention

The inclusion of cover that pays Health & Safety Executive Fees for Intervention (FFI) has attracted positive feedback following the relaunch of our commercial products in the Spring. Here’s some further information about FFI that’s aimed at helping agents explain what the new cover is and how enhances the value of the products. 

Background

• Fee for Intervention (FFI) is a “cost recovery scheme” operated by the Health & Safety Executive (HSE). Under the Health and Safety (Fees) Regulations 2012.    
• Under the Health and Safety (Fees) Regulations 2012, workplaces in ‘material breach’ of health and safety laws are liable for recovery of the HSE’s costs for any inspection, investigation and enforcement action that is undertaken. A ‘material breach’ occurs when the HSE issues a notification of contravention, an improvement or prohibition notice, or a prosecution.
• When criminal proceedings are started, FFI cease and criminal prosecution costs apply. (Note - prosecution costs are not covered by LEI, but the cost of legal representation is).
• From October 1, 2012, the HSE have been able to recover the costs of its interventions from businesses found to be in material breach of the law, even in the absence of a prosecution.
• If the HSE intervenes they are under a legal duty to recover costs in all cases where there is (i) a material breach of health and safety law and (ii) a requirement to rectify the breach is made in writing.
• There does not have to be an incident or prosecution to trigger such HSE involvement

Scope of FFI 

Sectors regulated by the HSE include: factories, mines, schools, fairgrounds, nursing homes, government premises, dentists and doctors’ surgeries. (Other occupations are regulated by  local authorities which do not operate a fee regime).

FFI applies to public and limited companies, partnerships, the Crown and public bodies, and to self-employed people.

It does not apply to:

• Self-employed people who only put themselves at risk
• Employees (Partners are not employees) 
• Work where another HSE fee is already payable (for some or all of that work), e.g. under the Control of Major Accident Hazards Regulations 1999

Other organisations that enforce health and safety law, such as the police or local authorities, will not be able to recover their costs under FFI.

FFI Charges 

Inspection with no action taken: No costs will be recovered
Inspection resulting in an email or letter: £750
Inspection resulting in a notice being issued: £1500

Full investigation: Ranges from approximately £750 through to several thousands of pounds.

HSE will invoice the business and expect payment within 30 days. A complaints process is available allowing businesses to bring a complaint about an invoice and HSE will explain the process when a charge is levied.

ARAG’s position

In our view, FFI are not fines and they have not been introduced as a civil penalty - but solely to support Government policy which requires that service users should pay for the costs of the services they use. HSE policy guidance makes it clear that the purpose of FFI is to recoup costs, and of course exposure to FFI may encourage good H & S practice. The law does not prohibit the use of insurance as a funding mechanism.

FFI could be considered similar to an order for opponents’ costs in a civil case, but the charges relate to internal admin, rather than legal costs incurred. Including indemnity for FFI for commercial policyholders completes a ring of protection by extending indemnity that has always been available for legal costs to appeal H & S enforcements notices, and to defend prosecutions.   

Since data has become available that allowed us to calculate the risk, we were pleased to add FFI cover as part of the May 2018 relaunch of commercial products. 

Notifying claims

We cannot settle FFI invoices until they have been raised, but policyholders should tell us about H & S activity as soon as they are aware that the H & S Exec has identified non-compliance that will incur FFI charges. We may also be dealing with a claim to appeal against an improvement or prohibition notice that relates to the intervention that has resulted in liability for FFI. If that is the case, customers should quote the reference of any claim that relates to the same event. FFI invoices should be sent to us promptly for payment.  

A cut too far?

Why do so many businesses operate without legal expenses insurance?
We still hear statistics that the vast majority of SMEs operate without the benefit of legal expenses insurance and my brokers tell me some of their clients are opting out of the legal cover when their insurance package is renewed.

In hard times such as these, all costs are scrutinised more carefully, but is cutting the legal expenses from a policy a cut too far? Are they throwing the baby out with the bath water?

To me this has two aspects; is the cover understood and is it properly sold?

Important covers provided by an LEI policy
Is a legal expense claim likely? I recently read that an employment dispute is 12 times more likely than a fire. The usual employment settlement is £3,000 but they can easily run to tens of thousands.

Add to that other covers like tax investigation, regulatory cover (including health and safety defence) and contract and debt. ARAG LEI policies have a limit of indemnity of £100k, so for the low premium involved surely it is well worth having.

Adding even more value
Don’t forget that the policy also includes legal and tax helplines which some think are worth the money alone.

And what about the online document drafting service? This is definitely a valuable benefit with circa 100 documents available for download and tailored online to suit the policyholder’s needs. For example, property owners can access a buy to let guide, draft a tenancy agreement and download an inventory checklist.

Selling LEI
Most SME business is transacted via a broker, so clearly they have a vital role to play. It may be tempting to let the client delete the legal cover, take the cheque and run, but is that in the client’s best interests?

I have sat in brokers’ offices and seen their renewal checklist where right at the end there is a one-liner “Commercial legal expenses, not required”.

At renewal discussions, is legal cover relegated to this tick box exercise at the end of the meeting or is it better to take time to sell the benefits and explain the cover?

Hopefully the answer is the latter option and ARAG can lend a hand with training and advice on sales materials, just ask.

I have run my own business and I would state categorically that every SME should have legal expenses insurance.

Personal Injury Advertising

Lord Young’s recent report Common Sense, Common Safety explored the perceived ‘compensation culture’ in Britain, which encourages a ‘if there’s a blame, there’s a claim’ mentality in which people are led to believe that they can get financial compensation for even the most minor accident. The report suggests that this places unnecessary burdens on businesses and the voluntary sector, making them take ‘an overzealous approach to applying the health and safety regulations’.

The report identifies the advertising conducted by the claims management companies as one of the major contributing factors to this problem. These advertising campaigns often promote the reward of non-refundable inducements, for example:

“We'll pay you £200 immediately after our solicitors approve your claim”
“As soon as we accept your claim, we promise to give you a £150 cash advance”

Under the current regulations of Client Specific Rule 6(b) of the Conduct of Authorised Persons Rules 2007 these inducements are allowed as they are not offered as an ‘immediate cash payment'. Following recommendations in Lord Young’s report, the Ministry of Justice (MoJ) is proposing to change this rule so that inducements of any kind are banned from all stages of the process. The MoJ has issued the Claims Management Regulation Consultation Paper outlining its plans to all claims management companies with all responses due by 10 February 2011.

So do the problems in the current system as laid out in the Common Sense, Common Safety report exist? As with anything they will to an extent but as the Consultation Paper points out “the majority of claims management businesses are not likely to be particularly affected.” Therefore is it right to limit the competitive edge that advertising and incentive strategies bring to the industry? In addition, as the money for inducements is not added to the claims cost but instead paid by the solicitors is there really that much of a problem to be solved?

You can read more in Lord Young’s Report and the MoJ’s Consultation Paper. To find out about legal insurance, visit ARAG’s website.