Management insurance is a comprehensive solution, providing financial peace of mind for three main heads of cover:
- Directors and Officers
- Company Protection (Entity)
- Employment Disputes
Directors* and officers* (D&O) have personal and unlimited liability when running and company. Should the person make a mistake, error, omission or fail to which causes a financial loss to a stakeholder*, the stakeholder will be entitled to litigate against the person. Insurance is designed to pay the cost to defend the allegation and if defence is not available, pay the damages and the claimants legal fees. The company is more likely to be litigated against rather than the person, therefore the same level of cover is provided to the company as is afforded to the director or officer. The highest element of claims comes from past present and future disgruntled employees, due to breaches of employment law which has led to the employee taking legal action against the employer.
Trends to Watch
- Online Advice – The internet provides a great wealth of “free” legal advice which encourages claimants to start legal proceedings against their employer, this is never truer when it comes to employment tribunals. Your organisation should be one step-ahead and protected against this online influence.
- COVID-19 – The pandemic forced many organisations to make operational changes. Such changes can carry a variety of new or enhanced D&O exposures, leaving your business at risk.
- Health & Safety Fees – These fees are enforced as interventions, fines and penalties for failing to adhere to COVID rules, risk assessments and the welfare of employees.
- Furlough – The furlough scheme is important to be managed carefully within an organisation. The breach of furlough rules makes your organisation vulnerable to litigation.
- Redundancies – When making an employee redundant, it can be unfair if not carried out in accordance with the strict letter of the law. If this employee has been working whilst furloughed, there could be both a civil and criminal case.
- Insolvency issues – Claims related to insolvency have historically been one of the largest sources of D&O losses, exacerbated by The COVID-19 pandemic and subsequent global recession. Insolvency-related D&O claims can result from stakeholders alleging that senior leaders failed to plan for financial disruption, putting them at fault for economic hardships. Insolvency rates have risen as many organisations struggle to make ends meet and in turn D&O claims have become more frequent.
- Cyber-security struggles – Cyber-attacks continue to increase in both cost and frequency, which can result in more D&O claims. Specifically, stakeholders affected by a cyber-attack may allege that senior leaders failed to implement proper cyber-security measures or establish a plan for responding to an attack.
- Employment Tribunals – Following the disbandment of up front fees for an employment tribunal in July 2017, there has been a surge of employment related claims made against the company and/or its directors personally.
Tips for Insurance Buyers
- Examine your management insurance programme structure and limits alongside your insurance professionals. This way you can ensure your cover is appropriate whilst taking market conditions and trends into account.
- Consider what is your and your fellow directors and officers net worth, considering houses, cars, boats, pensions, etc. The more you have, the greater you have to lose.
- Consult insurance professionals to gain a better understanding of your management exposures and cost factors in the market. This way you can ensure your business is protected, properly.
For more information about management insurance, and how it can protect your business, contact your Konsileo broker today.
* Director defined by the companies act. If the director is not registered act companies house then they may still have a liability as an officer.
* Officer is presently undefined but generally relates to a person who has authority either expressed or implied, so managers are included within the description of insured persons.
* A stakeholder is a party that has an interest in a company and can either affect or be affected by the business, e.g. directors, shareholders employees investors, clients, suppliers, competitors, media, government agencies such as HMRC, communities.