April 23rd, 2013

Italian Court Decision Encourages Strict Compliance with Industrial Safety Regulations

Posted at 1:00 AM ET

GC Editor

On December 12, 2007, there was a fire in an industrial plant in Turin that was owned and managed by ThyssenKrupp Acciai Speciali Terni S.p.a. (ThyssenKrupp), an Italian subsidiary of ThyssenKrupp Stainless group. The violent fire occurred in a cold annealing and pickling line, called APL5, where there is typically a significant amount of lubricant oil and paper, as well as sparks generated by the plant’s industrial process.

As some workers were trying to stop the fire using light hand fire extinguishers, a large flash fire hit them and other workers present in the area. The flash fire was caused when a pipe carrying lubricant oil under pressure burst. As a result, seven workers died in the accident, and three others were seriously injured.

The public prosecutors brought several ThyssenKrupp employees to trial: the chief executive, two executive directors, a general manager, the chief engineer of the plant and a representative of the workers entrusted with monitoring the company’s industrial safety.

All of these ThyssenKrupp employees were charged with manslaughter committed due to gross negligence for not having ensured safe working conditions at the Turin plant and failing to comply with several rules and protocols set forth in relevant industrial safety laws.

In addition to these crimes, the chief executive was also charged with voluntary manslaughter committed with a special kind of willful misconduct. Technically speaking, this kind of fault is known as “dolo eventuale” according to Italian criminal law doctrine. This type of intentional willful misconduct is characterized by the following:

a) The tortfeasor is aware that a harmful event is very likely to occur due to a failure to comply with duties related to industrial safety.

b) The tortfeasor is aware that if the event takes place there is a high probability that it may result in the death of people.

c) Nevertheless, the tortfeasor accepts the consequences that the possible outcome of the harmful event is the death of one or more persons.

d) The tortfeasor does not change conduct in order to avoid these consequences.

e) The omissions attributable to the tortfeasor can be linked to the event and the death of workers based on a correct and legal chain of causation.

Another kind of fault very similar to willful misconduct in Italian doctrine is “colpa cosciente.” This is a psychological state that is very similar to “dolo eventuale” but without the items “b” and “c” noted previously. Under “colpa cosciente,” the tortfeasor does not accept the consequences of death caused by the misconduct and is reasonably confident that such consequences would not take place.

Turin Court Findings

The court, in the case at hand, found that all of the accused persons were guilty of the crimes specified in the charges brought by the prosecutors. The court stated that the type of fault called “dolo eventuale” is very difficult to apply in practice, and it referred to a recent case of the Italian Supreme Court (Ruling 10411/11 rendered on March, 15, 2011)for a complete explanation of this type of fault.

In order to draw an understandable and clear difference between “dolo eventuale” and “colpa cosciente,” the court suggested imagining what would be the behavior of the tortfeasor if he knew that one or more persons were certain to die as a consequence of a very highly probable harmful event. If the tortfeasor decided to carry on with the same omissive behavior in this situation, then the tortfeasor’s psychological element can be construed as “dolo eventuale” (imputed intention to commit a crime). On the other hand, if the tortfeasor would change behavior in order to try to avoid deadly consequences due to misconduct, then the behavior would be construed as “colpa cosciente” (willful misconduct).

In the case of the chief executive of ThyssenKrupp, the court confirmed the charge of manslaughter committed with “dolo eventuale” (imputed intention). The following are the specific facts of the case:

  • The chief executive had solid experience in industrial safety and fire prevention, and had full authority to decide to invest in fire prevention.
  • He had decided not to spend any money on fire prevention and industrial safety at the Turin plant as he planned to close the local plant and transfer the production to Terni.
  • Insurance experts, fire brigades and a working group of ThyssenKrupp’s parent company had recommended intervention for fire prevention and industrial safety in APL5 at the Turin plant.
  • Despite the fact that the Turin plant was to be shut down shortly and further investment in maintenance was not authorized, the chief executive decided to continue production there for 15 months.
  • The chief executive decided that his staff would handle matters related to fire prevention and industrial safety, even though this group did not have the power to reach autonomous decisions.
  • The chief executive was perfectly aware of the poor situation regarding safety equipment in the Turin plant.

In summary, to commit a crime with “dolo eventuale” the conditions noted previously must be met. Specifically, items “b” and “c” are crucial to meeting this charge. Moreover, courts may judge that a chief executive knowingly accepted a very probable risk to harm or kill people as a result of failing to comply with industrial safety rules and protocols in the following situation:

  • Industrial safety conditions and fire prevention systems at a plant are of poor quality.
  • The chief executive is aware of dangerous conditions and has the power to decide that interventions are needed and to make the necessary investments.
  • Despite that, the chief executive does not decide to pursue any technical intervention and does not invest in safety intervention since the plant is going to be shut down. However, in the meantime, he continues production at the plant.

Corporate Liability

Crimes related to the violation of industrial safety rules and, more generally, to the protection of workers, are included in the list of corporate crimes governed by Legislative Decree 231/2001 and its modifications and amendments. This decree has introduced into Italian jurisdiction the “administrative liability” of companies for corporate crimes committed by their legal representatives or personnel in the interest of the companies. In other words, with the adoption of this statute, a company is subject to a criminal charge for acts of its representatives or personnel, and it is liable along with the person who committed the specific crime listed in Legislative Decree 231/2001.

The decree includes sanctions against corporations that are primarily administrative fines that may have an impact on a company’s balance sheet. Other sanctions may be more intrusive and disruptive to a company’s activities, including:

  • Forfeiture (confisca) of the profit or cost cutting that the company gained through the corporate crime.
  • Restriction on conducting company business for a maximum period of one year.
  • Revocation of licenses and authorizations for conducting certain kinds of business.
  • Ban from the ability to enter into contracts with public entities.
  • Ban from having access to public subsidies.
  • Ban from advertising the sale of products or services.

In addition, during pre-trial investigations, prosecutors can require the seizure of a company’s assets to prevent the company from receiving any advantages as a result of a crime and to secure payment of fines.

Legislative Decree 231/2011 also provides that a company can be exonerated from this kind of responsibility if it is able to demonstrate that it has a compliance program in place dedicated to preventing crimes noted in the decree. The program must be adequate, effective and monitored by a specific supervisory body.

In the original version of Legislative Decree 231/2011, crimes that involve violation of industrial injury laws were not included in the list of crimes that would trigger this new corporate liability. In fact, the provisions of the original decree were mostly aimed at preventing crimes related to corruption of public officers or fraud relating to public funds.

In August 2007, the decree was amended so that corporate liability would also apply to the crime of manslaughter or causation of personal injuries as a result of violation of industrial safety rules. This legislation made companies more aware of the need to comply with the regulations of Legislative Decree 231/2011 to prevent corporate crimes since almost every commercial company is exposed to the risk of causing injuries to workers when industrial safety rules are violated.

The ThyssenKrupp case has put a number of companies on alert since the failure to ensure safe working conditions in the plant led to a lethal accident and was construed as an imputed intention to cause harm to or the death of workers.

Impact on Insurance Coverage

If the ruling of the Turin Court in the ThyssenKrupp case is not overruled on appeal, it will have considerable impact on both corporate liability and corporate insurance risk.

Two conclusions emerge from the court’s finding that the chief executive of a company is liable for committing a crime with imputed intention: The special kind of psychological element known in Italian criminal law doctrine as “dolo eventuale” is something more than gross negligence or even willful misconduct and is comparable to a real intention to commit a crime. This intentional behavior of the legal representative can be attributed to the company given the theory of “immedesimazione organica.” In simple words, it is as if the company, through its legal representative, intentionally caused the harmful event by failing to take the necessary actions to provide the plant with new and functioning fire prevention and industrial safety equipment.

In this type of situation, insurers may wonder if damages resulting from a harmful event are still indemnifiable. According to Article 1900 of the Italian Civil Code, insurers are not obliged to pay any indemnity in cases where the insured party causes the loss intentionally. Since a chief executive’s intention in committing the crime is directly attributable to the company itself, insurers may have grounds for denying payment of an indemnity.

Commentary

The court decision rendered in the ThyssenKrupp case must be carefully considered by companies that decide to do business in Italy along with their insurers.

Companies must try to put in place a solid system of fire and industrial injury prevention along with an adequate and effective compliance program to avoid the corporate liability stated in Legislative Decree 231/2011. Such compliance efforts would also help avoid possible involuntary violations of industrial safety rules.

Insurers should ensure that corporate clients doing business in Italy act in strict compliance with the relevant rules governing industrial safety and fire prevention and with the provisions of Legislative Decree 231/2001, which can be considered as prima facie evidence that the company is in control of managing industrial risks.

 

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