Cedric Stephens | Analysis of a $560m workplace injury award
ADVISORY COLUMN: RISKS & INSURANCE
Today’s headline partly mirrors the title of an article that I wrote on March 31, 2019. The size of that award was $35 million, or 6.25 per cent of the workplace injury award that is the subject of today’s column.
I wrote last year that the Financial Gleaner March 17 piece that sparked my comments was mandatory reading for owners and aspiring operators of small and medium-sized businesses. I doubt the advice was followed. As a result, I am adding general insurance company executives, insurance intermediaries, and shareholders and managers of companies listed on the Jamaica Stock Exchange to the list. A $560 million court award is a big deal.
Workplace injuries, including diseases, especially now in the age of COVID-19, are important. They are not just the subject of articles in legal journals. They can have real-life consequences as I argued last year and as this newspaper reported on October 9 in the case of Janet Edwards v Jamaica Beverages Limited.
Employers have legal duties to protect their workers. When employers breach those obligations, the courts can step in. What the courts say and do are of significance when an eight-figure award is made, and the company does not have insurance ‘backative’ to pay it. It can be forced into liquidation. Its assets can be sold to satisfy the court award as happened in the case of Jamaica Beverages Limited, JBL.
Legal commentator Shena Stubbs-Gibson wrote on December 15, 2019, that “it is not surprising that the award has necessitated the liquidation of JBL. The award appears quite unprecedented and would easily have exceeded the maximum sum insured on most companies’ public liability or general (liability) insurance policies (where matters of this nature would tend to fall). Six hundred million dollars would also have easily exceeded the accumulated retained earnings of most companies in Jamaica. Furthermore, JBL is not one of the members of Jamaica’s notional billion-dollar round table".
AIRMIC, a United Kingdom’s association of insurance and industry risk managers, wrote in one of its 2014 guides that “to understand the importance of insurance to the viability of a company, a policy should be treated as having a value equal to the limit of indemnity that is purchased. If a company pays £2 million to purchase a £100 million limit of indemnity, the contract should be viewed as being potentially worth £100 million … companies buy insurance to protect their balance sheets and to reduce volatility in the profit and loss account caused by large insurable losses".
This is why companies and individuals should properly evaluate the risks that they face and develop a plan to manage them.
I recently reviewed a small sample of liability policies that were bought to protect business operators in one industry. The insurances were bought by different insurance brokers. Not one of them had a limit approaching $35 million. The data did not provide any information about the factors that guided the selection of those limits or whether they had been arbitrarily chosen.
The claim against JBL
The claim made by Miss Edwards arose out of an incident at her place of work at the Factories Complex, Glendevon, in the parish of St James on April 27, 2000, when she was shot in the neck by gunmen during criminal activity at JBL's premises.
Miss Edwards filed a writ of summons on October 2, 2002, supported by a statement of claim filed on October 7, 2002. In the statement of claim, Miss Edwards alleges that JBL is liable to her for breach of contract and in negligence. In relation to the breach of contract, she alleges that it was an implied or express term of the contract that JBL would
• take reasonable precautions for her safety;
• take steps not to expose her to the risk of damage or injury, which it knew or which was reasonably foreseeable in all the circumstances;
• take reasonable care that the place and circumstances under which she worked was safe;
• provide and maintain a safe system of work;
• provide adequate security for all staff members, including her;
• provide an adequate plant and equipment.
Miss Edwards pleaded that while she was at work on April 27, 2000, gunmen entered JBL's business located at the Factories Complex in Glendevon with the intention of committing a robbery. It was during this activity that she was shot.
She particularises the breach of contract and negligence as follows, that JBL
• failed to take any adequate precaution for the safety of the claimant while she was engaged in her work;
• exposed the claimant to the risk of injury, which JBL knew, or ought to have known, and which was reasonably foreseeable;
• caused or permitted the claimant to work various hours of the night when it was manifestly unsafe to do so;
• caused or permitted the claimant to work in a dangerous place;
• failed to provide the claimant with a safe place of work and/or keep it safe from intruders;
• failed to provide adequate security and thus exposed the claimant to foreseeable risks;
• failed to have adequate regard for the claimant's safety;
• exposed the claimant to unnecessary risk of injury about which JBL ought to have known;
• failed to heed the claimant's repeated warnings about the need to have adequate security for the protection of staff members, in particular, at nights;
• failed in all the circumstances to take reasonable care for the safety of the claimant.
Had JBL retained the services of a professionally trained risk manager, executed a plan to effectively manage its workplace-related risks, and bought employers’ liability insurance with more adequate limits, chances are that it would be still in operation today despite the claim from the former employee.
By my guess, these accumulated costs would not have exceeded 10 to 15 per cent of $560 million.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to firstname.lastname@example.org.