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06 July 2020

Coronavirus fallout prompts need for Directors’ and Officers’ insurance

 

With coronavirus continuing to wreak havoc throughout the business world and lockdown heralding a slide towards impending recession, business owners, directors and managers are having to make difficult decisions, making Directors’ & Officers’ insurance an essential consideration.

Directors’ and Officers’ Liability Insurance basically protects you from legal actions brought against you by shareholders, investors or other stakeholders; employees for injury or breach of employment law; class actions; and regulators.

With global changes to legal and regulatory requirements placing growing accountability on directors and officers, we live in an increasingly litigious culture, with legal action ever more prevalent. Add to this the occurrence of coronavirus, presenting its own unique set of challenges, and it is now a very uncertain landscape in which directors and company officers have to operate.

The coronavirus factor

The impact of coronavirus is sending countries across the world into a predicted economic slump, with continued disruption to business and no obvious or quick solution, or timeline. Certain sectors, including travel, leisure, retail and finance, have been badly affected, with an increase in insolvencies and difficult trading conditions.

Given how quickly the virus has spread, it has been difficult for D & O’s to ensure they are responding effectively. 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 impact given the crisis is ever-evolving? Depending how directors and officers have handled this fast-moving crisis, a rise in coronavirus-related claims seems likely.

Typical lawsuits could include disclosure allegations (there have already been two coronavirus class action lawsuits against Norwegian Cruise Lines and Inovio); 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.

Our expertise

Erskine Murray strives to protect all our customers against their various exposures, particularly new and emerging risks, and can advise on the extra protection D&O’s insurance can offer. It’s certainly worth remembering that defending legal action can run into 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 covered by any other liability policy, and, given the growing trend towards litigation, along with the current coronavirus situation, you need to ask yourself if it’s worth taking the risk for a relatively small outlay.

Our Management Liability Practice (MLP) policies are broader than simple D&O policies,  providing extensive cover against a range of scenarios, including defence costs for the business itself in the form of Corporate Legal Liability and Employment Practices Liability, with up to £5m liability limit. We can discuss which type of policy is best to meet your specific requirement and arrange appropriate cover from a reputable insurer with a strong and proven claims history.

To discuss your D&O requirements and ensure you are fully protected, call us today on 0116 265 4300 or email [email protected].

Sources:

Directors’ and Officers’ Liability Insurance - What’s the impact of COVID-19?

Coronavirus and D&O Insurance: An Interim Update

Coronavirus: directors' liability and insurance claims

COVID-19 UK: D&O liabilities and risk management relating to coronavirus