As a result of the COVID-19 pandemic business operators and owners have had to be incredibly agile and make numerous business decisions to maintain business continuity. However, there is a risk that these decisions could, without careful consideration, expose them to costly compensation claims.
Directors and Officers liability (D&O) insurance is designed to cover the cost of defending claims made against your business’ directors and key managers (officers) for alleged wrongful acts.
Examples of claims that may arise as a result of changes made in light of Coronavirus include allegations against management for:
- Distress caused by lack of proactive management of the crisis within the business.
- HSE investigations and bodily injury if the employee becomes infected with COVID-19.
- Discrimination if the company is managing risks differently in different locations, teams, and so on.
- Financial loss arising from unnecessary enforced self-isolation by employer.
- A failure or absence of back-up supply causing problems with production.
- Lack of planning to maintain business continuity and income to the business.
- Lack of cyber controls to keep data secure during a period of increased staff home working.
Adapting and retaining control in the face of COVID-19
Businesses have been quick to implement business continuity plans to maintain a ‘business as usual’ operation, where possible, but it is important that businesses remember their statutory duty-of-care for the health & safety of their employees and continue to provide a safe place to work. Employers also have moral responsibilities to ensure staff feel safe and secure in their employment.
During these testing times, it will not be uncommon for businesses to either furlough or re-deploy staff into other areas of the business. These actions can carry with them risk and it’s important to identify, understand and manage these risks. For example, where you are re-deploying staff, it is important that employers provide necessary and adequate training on the new tasks employees are being asked to undertake and ensure appropriate risk assessments and method statements are carried out.
Management liability (MLP) insurance
Every director, senior company executive and manager is a potential target for litigation. Directors and officers without insurance are effectively risking their personal wealth since the financial implications of a legal action can be disastrous. So it is really important to put in place some cover to help protect you.
Ideally a management liability policy (or Directors & Officers liability policy) should be included within your company insurance programme to assist with claims arising from allegations of wrongful acts.
Keep your insurer in the loop
Where circumstances arise that could reasonably be expected to give rise to a claim in the future, directors should consider notification of such circumstances to their insurers. It is advisable that notifications are carefully considered and are tailored to the requirements of their management liability policy. It is recommended that companies refrain from blanket notifications relating to COVID-19.
Extra benefits of a management liability insurance policy
MLP policies will also, generally, include free access to legal & HR helplines. Advice will be available on a myriad of circumstances, including the furloughing and re-deployment of staff as well as regulatory guidance which can be invaluable during these uncertain times. Also, do not forget that you can add an employment practices liability extension which can help businesses with the management of employment disputes if they arise.
Use your broker
In conclusion, we’re in fluid and changing times. It would be prudent for businesses to talk to their insurance broker about the added liability risks as a result of COVID-19 and we would encourage businesses to advise their brokers of anticipated changes in risk exposure, such as diversification of business activities, mergers & acquisitions and bankruptcy filings.
Alan Boswell Group are experienced in assisting our clients during times of need and so if you have any issues or concerns you would like to discuss or are unsure on how to resolve a problem, please do not hesitate to get in touch.