Warning insurance is more important than ever to businesses
A firm of independent financial advisers and insurance brokers is advising business owners to check that they have directors and officers insurance in place to cover against possible third party claims.
Rees Astley, which has offices in Newtown, Aberystwyth and Shrewsbury, said it’s more important than ever that businesses protect against possible legal ramifications arising from the Covid-19 pandemic.
Directors and managers could be held liable for claims by shareholders, creditors, employees or regulatory bodies who feel that they have failed in their duties.
Possible scenarios for a claim could be a director being accused of failing to exercise a duty of care over their employees or cutting corners may have led to cases of environmental damage attributable to the negligence of a particular manager or director.
Legal prosecution could arise from breaches of contract, a failure to protect against a cyber attack if a company has a data breach or there could be an accusation that a business did not have an adequate business continuity plan in place.
“The potential for claims and court cases against corporate decision makers has been heightened by the pandemic, especially if a company is a PLC with shareholder responsibilities,” said Nick Jacques, a Rees Astley account executive.
“A fall in a company’s shares value may be seen as the result of mismanagement and ill-advised strategies during the crisis. There are many other situations where a director or senior manager could personally be subjected to claims by third parties.
“Cost-cutting may be a temptation for many businesses during and in the aftermath of the coronavirus outbreak. However, we strongly advise business owners not cancel their directors and officers (D&O) cover. It could actually be more important than ever.
“We advise directors and senior managers without D&O insurance to put a safety net in place to help protect their personal financial assets – and avoid a possible prison sentence in the most serious cases. In economically difficult times, the business world could become highly litigious.”
D&O can protect directors and senior officers of limited companies against personal financial loss arising from third party claims of alleged errors or omissions. It can protect personal assets from unlimited liability by paying for legal costs and expenses and damages awarded.
Mr Jacques stressed that, like all insurance policies, D&O policies are subject to terms, conditions and exclusions.
