Getting Cover to Protect Your Business and Your Officers
Legal actions may be brought against companies for a variety of reasons ranging from allegations of professional negligence resulting in a financial loss to alleged liability for injury/illness or for loss of or damage to property.
Businesses can be pursued for negligence if an employee or third party is alleged to have suffered injury or illness or a loss of or damage to property, due to their actions or inaction. Directors and Officers may be pursued personally for a variety of reasons, but actions most commonly arise from “allegations” of wrong doing regarding one of three main areas: health and safety failings, financial mismanagement and employment law failings.
The most obvious solution is to take out an insurance policy to mitigate an individual exposure. Directors & Officers’ Liability Insurance is an important protection that provides indemnity to all past, present and future Directors and Officers of a company for any personal liability they may assume in the course of their business duties.
An example of how this might affect businesses in the South West (UK) occurred a few years ago following the high-profile action, brought under the Corporate Manslaughter and Corporate Homicide Act 2007, against Cotswold Geotechnical Group.
In September 2008, geologist Alexander Wright died when an unsupported trial pit he was working in alone caved in at a site in Gloucestershire.
Director Peter Eaton was prosecuted under the Act and charged with the unlawful killing by gross negligence.
The Company was fined £380,000.
The judge, Mr Justice Field, described the company’s gross breach of its duty to Mr Wright as a “grave offence”. In issuing the fine, the Judge said: “It may well be that the fine will put this company into liquidation. If that is the case, it is unfortunate but unavoidable. But it is a consequence of the seriousness of the breach.” The prosecution was the first under the Act.
The act provides that action for manslaughter can be brought against a company if health and safety failures result in a persons death, previous charges could only be brought by identifying and prosecuting and individual with a “directing mind”, Whilst Directors & Officers’ liability would not provide indemnity in respect of awards made under the act, it will provide defence costs. A policy will also provide indemnity to the “Entity” and the individual for actions arising.
However, this cover is most commonly called in to action in the event of allegations of wrongdoing surrounding Employment Law.
Such allegations include bullying, harassment and discrimination, of any description and even the most spurious of allegation can cause costs to be incurred and, if procedure is not adhered to, even awards to be granted.
All of these considerations make it more important than ever that Directors and Officers comply with their lawful duties and responsibilities. Insurance can provide an effective protection.
If you would like to know more about the protection D&O insurance affords your company and its senior employees, please contact
chris.lennon@uk.lockton.com
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