The need for D&O Insurance post-Covid
The pandemic continues to cause problems for the business world, with company directors and officers having to make difficult decisions and face increasing scrutiny and accountability for their actions. Given the uncertainty of world events, an increasingly litigious culture and the growing accountability of company officials, the need for Directors and Officers (D&O) insurance has never been greater.
D&O insurance policies protect company board members, executives and managers (and the companies they serve) from claims or investigations arising from their decisions and actions within the scope of their regular duties.
For example, how a company has responded to the rapidly changing coronavirus situation - particularly after the event - may subject its Directors and Officers to the scrutiny of a wide range of claimants, including shareholders, competitors, customers, vendors, and suppliers, employees and regulatory entities.
Basically, D&O Liability Insurance can potentially offer protection against legal actions brought by shareholders, investors or other stakeholders; employees for injury or breach of employment law; class actions; and regulators.
Difficult decisions
Given how quickly the virus spread and continues to do so, it has been difficult for D & O’s to respond effectively and make the right decisions. Do you wait and see or take pre-emptive action? How do you protect employees and reassure customers? What do you disclose to regulators and shareholders? How can you accurately assess the impact given that the crisis is ever-evolving? Depending on how directors and officers have handled this fast-moving crisis, a rise in coronavirus-related claims is likely.
In general, Directors and Officers may find themselves targets of claims that their decisions, actions or inactions, taken in response to coronavirus and/or the market conditions created by the pandemic, were negligent or in breach of their fiduciary duties to the business, such as duty of care, (which obligates them to exhibit prudent judgement).
Typical lawsuits could include disclosure allegations; insolvency claims; compensation claims and mismanagement allegations. The latter could take the form of losses suffered by investors blamed on inadequate crisis management; regulatory action against individuals for failing to ensure the health & safety of employees at work; and an increase in cyber risk accountable to directors failing to introduce sufficient controls for home working.
A tailored solution
It’s important to understand that defending legal action can run into many thousands of pounds and, as a director or officer, your personal assets can be at risk if a claim is made against you. Given that D&O claims are not generally covered by any other liability policy and there is a growing trend toward litigation, it is vitally important you have adequate insurance in place.
We can arrange D&O policies including Management Liability and Employment Practices Liability extensions, tailored to your specific requirements, providing cover against a whole range of scenarios, including defence costs for the business itself in the form of Corporate Legal Liability and Employment Practices Liability.
To discuss which type of policy is best suited to your needs, ensuring you have the right protection in place, please contact us today. Call TMD on 01992 703 000 or email: insurance@mcdonaghs.co.uk