In their positions, Directors and Officers have specific duties, responsibilities, and powers. One incorrect move or decision means they can be personally scrutinised by employers, shareholders, and regulators and therefore board engagement with Directors and Officers (D&O) also known as Management Liability insurance, is vital.

We previously held a webinar with expert panellists Gary Gallen, Founder and CEO of specialist law firm rradar, and Nick McGarey, Underwriter at Beazley, who mentioned that in both the legal and insurance sectors, they are seeing an increase in litigation and claims against businesses and senior management teams.

Our panellists provided the following top tips to protect yourself as a Director/Officer:

• Ensure regular check-ins with your remote employees as isolation and exclusion can trigger claims against you and/or your business
• Regularly review internal and external data protection policies and procedures
• Provide data protection and cyber training to employees as 90% of all data breaches occur because of human error
• Embrace and innovate the new way of working and offer flexibility for existing and prospective employees to avoid unfair treatment claims
• Set out health and safety measures and ensure processes are followed and clearly documented to avoid investigation by the HSE
• Have a robust business continuity plan in place
• Remember that smaller businesses are just as likely to be targeted as larger businesses
• Speak to your insurance broker about how you can mitigate these risks through careful risk management and Management Liability insurance

It is important to remember that Executive Directors, Non-Executive Directors, Shadow Directors, and Officers, including those who have retired, can be held culpable for Directors and Officers claims so now is the time to consider your personal protection.

We are here to help

If you would like to discuss your personal exposures further, or for more information about Management Liability insurance and what it covers, get in touch with Jason Cohen:

JasonCohen@hamiltonleigh.com

Legal actions may be brought against companies for a variety of reasons ranging from allegations of financial mismanagement, to alleged liability for injury/illness or for loss of or damage to property. Therefore, board engagement with Management Liability insurance is critical to protect your business.

What is Management Liability Insurance?

Management Liability insurance is a suite of covers designed to offer legal protection for you, your fellow Directors and Officers and your company for wrongful acts you have, or are alleged to have, committed. There are three sections to this suite of covers:

Directors & Officers Liability (core) – Directors and Officers (D&O) Liability insurance provides protection for the Directors and Officers of a company for claims against them for wrongful acts committed solely by reason of their acting as a Director or Officer of a company.

Employment Practices Liability (optional) – Employment Practices Liability (EPL) insurance protects your company against financial loss from claims made by employees for a wide range of employment practice violations, including unfair dismissal or discrimination on grounds of sex, race, disability, religion, belief, or sexual orientation.

Corporate Legal Liability (optional) – Corporate Legal Liability (CLL) is similar to D&O but provides indemnity in respect of costs and awards for any allegations/claims made against the company (entity) as opposed to individuals.

Frequently Asked Questions

Why do we also need Corporate Legal Liability?

As claimants will want the best chance of success, they will deploy a scattergun approach against you (the individual) and the company you work for. Therefore, purchasing Corporate Legal Liability ensures an all-encompassing protection.

What is the need for Employment Practices Liability cover?

These immediate issues aside, Employment Practices Liability (EPL) is a vital cover as it defends your business against the allegations of wrongful dismissal, discrimination, and harassment to name a few.

What is a wrongful act?

Examples of wrongful acts include:

• Inland revenue investigation
• Flouting regulations
• Making a poor business decision that effects income &/or shareholders or brings the business in to disrepute
• Making an acquisition with no/scant due diligence that then puts your core business at risk
• Closing business locations and causing loss to the landlord
• Sanctioning a site clearance without an environmental survey putting protected wildlife at risk
• Taking over a business and its obligations but not fulfilling them

In short, anyone can make an allegation of a wrongful act for any number of reasons and Management Liability cover will defend you, as long as you have not acted fraudulently or committed a criminal offence.

Who is covered under a Management Liability insurance policy?

All past, present, and future:

• Executive Directors
• Non-Executive Directors – (The liabilities of non-executive directors are the same as those of executive directors)
• Shadow Directors – A Shadow Director is someone who is not a registered Director of a company but exercises control or influence over a business and on whose instructions the Directors of the company act. Professional Advisors are not regarded as Shadow Directors. A Shadow Director is treated in many ways as a real Director of the company concerned and so will be bound by the same duties and obligations
• Officers – Managerial and supervisory roles

What is the most common type of claim under the policy?

Whilst claims can be brought by anyone, the most common claims relate to allegations of Employment Law failings such as:

• Bullying
• Harassment
• Discrimination
• Failure to promote/recruit

Are there any exclusions under the policy?

Generally speaking, cover is broad and designed to pay defence costs and awards, irrespective of cause. However, certain types of risk are typically excluded, such as deliberate acts, criminal acts, wilful misconduct or damages for bodily injury and property damage.

A risk management checklist for Directors and Officers

Our specialist team have drafted the following guidance to protect yourself as a Director/Officer:

• Educate yourself on the risks that drive litigation and regulatory actions
• Invite subject experts to board meetings to discuss emerging risks
• Draw on the expertise of insurers and learn from D&O claims trends
• Reduce risk by developing robust governance and strong culture
• Encourage diversity of knowledge and experience at board level
• Carry out due diligence on business partners for corruption, ethics, and cyber risks
• Do not be afraid to question and challenge the conduct of others
• Take red flags seriously and act on them

Next steps

For more information on how you can protect yourself and your fellow Directors and Officers within your organisation, get in touch with Jason Cohen:

JasonCohen@hamiltonleigh.com