Why is D & O insurance so crucial in today’s world…
Rapidly changing risks and increasing compliance requirements mean business leaders are under scrutiny over alleged wrongdoing as never before. There are a growing number of areas that can result in a company and its directors being sued.
The landscape today
Tightening regulations, emerging technologies, increasing shareholder activism, intensifying class action litigation activity, escalating merger objections and IPO activity and the rise of regulator activism are among the many challenges facing corporate directors and officers. Executive liability is increasing yearly, particularly in areas such as employment and data protection.
Third party litigation funders are changing the global litigation map, with their influence pivotal in the development of collective actions against financial institutions and commercial entities and their directors and officers. Litigation funders are front and center in some of the largest multi-jurisdictional claims. Activity is expected to increase.
Managers face a growing threat from legal and regulatory liabilities which could result in costly investigations, criminal prosecutions or civil litigation, putting the company’s assets, and their own, at risk.
Covers directors against personal lawsuits in civil courts – they have unlimited liability at law. This is defence costs and any damages awarded.
Covers directors against any personal criminal defence costs but not any fines or penalties imposed.
Covers the entity and a very important cover here is employment disputes as these are on the increase.
Reasons for growth in D&O
VERY IMPORTANT FOR SME DIRECTORS – the rise of criminal actions personally against directors by the HSE.
Health and Safety at Work Act 1974:
Where an offence is proved to have been committed with consent, connivance or negligence attributable to any director, manager, secretary or similar person the individual as well as the company is guilty of the offence and is liable to criminal proceedings.
Between 2015 and 2016 HSE prosecutions against individual directors TREBLED – they realised they had a new target, during this same period almost no employees were prosecuted, the HSE target clearly is the directors
Trustees and D&O
Trustee Act 2000 sets out standard of care needed:
A trustee must exercise such care and skill as is reasonable in the circumstances with regard to.
Any special knowledge or experience that he has or holds out to have.
If acting as a trustee in the course of a business or a profession to any special knowledge or experience that is reasonable to expect of a person acting in the course of that kind of business or profession.
TRUSTEES CAN INCUR LIABILITY AS A DIRECTOR.
Committee members of voluntary groups, charities, community groups and pension funds can all incur unlimited personal liability for:
- Debts incurred – lease arrangements – underinsurance.
- Redundancy for staff and payments as well as any TP liability.
- Policy Wording
What is a Claim?:
Any suit or proceeding brought by any person or organisation for monetary damages or relief or non pecuniary relief.
Any criminal prosecution brought against the insured.
Any administrative or regulatory proceeding or official investigation regarding any specified wrongful act of an insured.
Any written demand to hold an insured person responsible for any wrongful act.
What costs and damages are covered?
Defence costs include:
- Reasonable fees, costs and expenses incurred with written consent.
- Includes premiums for any appeal bond or bail bond.
- Resulting from investigation, adjustment, defence and appeal of the insured but not salary time or expenses of the insured.
NOTE DEFENCE COSTS OFTEN OUTWEIGH DAMAGES!
OFTEN DEFENCE COSTS PAID TO PREVENT DISQUALIFICATION OF THE DIRECTOR.
As an insurance broker we are good at the unusual, the complex and the specialist. We take the time and effort to get it right for you and your business.
Roxburgh Insurance Brokers – advice and service you can rely on.
