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Director & Officers Liability

There are believed to be over 200 ways of breaching the law in the Companies Act alone for which a director can be prosecuted. Legal actions against Directors are not just restricted to shareholders but could also include creditors, competitors, customers, employees, regulators or government agencies. We work with the specialist insurers to ensure that directors’ personal assets are protected in the event of such legal actions.

Directors & Officers Liability Insurance covers the cost of compensation claims made against individual directors &/or key managers for alleged wrongful acts including:

  1. Breach of trust
  2. Breach of duty
  3. Neglect
  4. Errors
  5. Misleading statements
  6. Wrongful trading

If your business does not have this cover, the directors and officers face the burden and cost in defending themselves against such exposures as disqualification from holding the position of director, civil proceedings or criminal prosecution arising out of wrongful acts.

If a company does not buy D&O and is unable, or unwilling, to protect a director against legal action then the director's personal assets are at risk. For example, creditors can issue legal proceedings against directors personally for a breach of common law duty of care.

The number of company directors prosecuted for health and safety offences continues to increase and it is believed that courts are aiming more for the individual directors than at the business itself. Fines are now routinely reaching £1,000,000 for non-fatal offences and even those where nobody has been injured, meaning that any breach of the Health and Safety at Work Act is potentially a serious threat to your business.

Litigation and compensation is expensive and without insurance, there is the possibility of directors becoming personally liable for a company’s litigation costs if the company loses the action. This could, for example, prejudice the family home because unlike a Company, all categories of Directors’ personal liability are unlimited.

Employers Liability

This is a compulsory class of insurance for all but the smallest, family businesses. The policy covers you for the cost of negligence claims brought by your employees against you for death, injury and disease.

Injuries to employees have a significant human impact. However, there are also financial impacts not only around the compensation provided to employees but also for legal fees and significant amounts of management time in dealing with the claim. We will work with you to address Health & Safety risks and to help bring down the overall cost of claims.

The minimum compulsory limit for Employers Liability is £5,000,000 but for most businesses this is too low. Having too low a limit of indemnity puts a business at risk due to significantly uninsured losses.

On 7th September 2017, the Lord Chancellor and Justice Secretary announced that the discount rate used to calculate future losses in personal injury and fatal accident cases was to fall. The new discount rate is still to be determined but as stated in the government’s press release: www.gov.uk/government/news/reforms-to-compensation-payouts-announced it is estimated that it could be between 0% and 1%. This will affect the amount of compensation that someone is awarded for a personal injury claim - the lower the discount rate is, the higher the initial lump sum award.

As an example, a 25-year-old female earning £20,000 net a year but so seriously injured in an accident that she can never work again and requires nursing care estimated at £50,000 a year: The previous calculations would have awarded her compensation of £2,096,500. If the discount rate remained at minus 0.75% the award would be £5,205,000 but if the discount rate is reduced to, say, 0.50% the compensation would then be calculated as £3,489,000. Such items as legal costs would be in addition to the calculated amount. The new discount rate for catastrophic injury claims is still to be determined but as can be seen from the example it will have a significant impact.

Any business which has exposure for injuries to employees has a significantly increased financial exposure due to the reduction in the discount rates, particularly if faced with claims from several injured parties. In the event of a very serious accident your existing Employers Liability limit of indemnity may not be sufficient to meet your financial liabilities and we will work with you to mitigate that possibility.

Preventing accidents has both human and financial benefit. Insurance is a method to transfer your risks to another party but there are still exposures which remain uninsured such as the management time spent in dealing with the aftermath of accidents. Good Risk Management practices help to prevent accidents or to mitigate the cost of those that, unfortunately, still do occur.

Working in conjunction with selected insurers or specialist independent companies we can help you to put together an appropriate Risk Management programme.

Outside these formal Risk Management programmes, you can also obtain useful information by keeping up to date on Health & safety issues by subscribing to sites such as the HSE at: www.hse.gov.uk/risk/office.htm

Our aim is to help you avoid any claims which will disrupt your business. In addition to the specialist local companies with whom we work, many of our partner insurers offer risk management tools at either no charge or discounted prices.

Employment Practices Liability

Employment practices liability insurance, known as EPL insurance or EPLI, provides coverage to employers (including its employees) against claims made by employees for alleged employment violations and breach of employment law such as those alleging:

  • breach of written or implied contract of employment
  • discrimination (e.g. based on sex, race, age or disability)
  • failure to promote
  • employee defamation or invasion of privacy
  • emotional distress due to employment related actions
  • retaliation
  • wrongful, unfair or constructive dismissal
  • workplace harassment 
  • wrongful deprivation of a career opportunity

Extensions & Optional Extras are available for exposures such as Acts committed (but not known to employer) prior to inception, Advancement of defence costs, Automatic inclusion of new subsidiaries, Extended claims notification period, Investigation costs, Outside directorships, Punitive damages awards, Seasonal and temporary workers and USA claims.

Actions that employers could take to remove or mitigate their risks include implementing Appraisal processes, Employee Handbooks detailing policies & procedures, Equal Opportunity Statements, Job Descriptions and Role Profiles clearly defining expectations, Record keeping systems and Screening and hiring programmes.

Large organisations usually have the in-house have resources to deal with all aspects of employee relations. However, smaller companies rarely have their own legal or human resources departments and are, therefore, more vulnerable to losses. Legislation is reviewed and updated on a regular basis, so it can be difficult for an employer to keep up to date with developments but good standard insurance policies include resources which the insurers offer to policyholders, including discounted rates for contract and policy reviews or bespoke training, free legal advice helplines, guides to employment law, notification of updates to employments laws, risk solutions websites, self-audit checklists, template documents and training modules.

Cover can be purchased on a stand-alone basis or as an extension to a Directors & Officers Liability policy.

Environmental Liability

Standard insurance policies do not typically provide cover for gradual pollution. For environmental exposures such as toxic air emissions, water pollution, dust, soil pollution, greenhouse gas emissions or land contamination exposures a specialist Environmental policy is required.

Industries where this cover has been highlighted as most relevant include:

  • Bulk storage companies
  • Chemical companies
  • Construction projects
  • Food and beverage processors
  • Heavy industry manufacturers
  • Logistics and haulage companies
  • Power and utility companies
  • Property owners and developers
  • Warehousing companies

We work with specialist Environmental insurers who have expertise in risk engineering and claims handling to provide insurance and risk protection programmes tailored to your business.

Motor Fleet

Motor insurance is compulsory and a business operating with several vehicles will benefit from the advantages of a Commercial Fleet Policy that will provide cover for all vehicles under one policy. Combining several vehicles under one policy will reduce administration costs.

In addition to the administration cost savings, a Motor Fleet Policy allows your own experience and risk management practices to have more influence on the overall premium and the larger the fleet, the more that your own business’ claims experience impacts the rating.

You can add and delete vehicles as necessary, only informing the insurers periodically by declaration but it is important to note that the Motor Insurance Database (MID) requires all changes to be notified by you within strict timescales.

Typically, Motor Fleet policies will allow vehicles to be driven by anyone who has your permission subject always to the usual licensing requirements. This has the potential to expose Motor Fleet insurers to a wide range of drivers so the controls that you exert around who can drive will influence the premium.

For larger fleets, we work with insurers who offer risk management support to mitigate the cost of claims. That has benefit for you in reducing the number of claims and the management time spent dealing with them, reducing disruption to the business and keeping down your insurance premium.

Motor Policies do not contain a financial cap for third party injury claims. However, there are policy limits for third party property damage. Losses arising can run into millions of pounds so having too low a limit of indemnity puts a business at risk due to significantly uninsured losses. For example, a commercial vehicle hitting a major road bridge under a mainline railway connection could have significant financial losses. Your motor third party property damage limit should be reviewed regularly to take into account the worst-case scenario.

Pension Trustees

The policy provides cover for defence costs, awards, damages and investigation costs of pension trustees, secretaries or administrators involved in operating a pension scheme who are alleged to have been negligent in their duties.

For additional premium cover can be obtained for:

  • Past or present Employee Benefit or Welfare benefit plans
  • Past or present Pension Plan established for Company employees
  • Contribution Notice
  • Civil fines & Penalties
  • Pensions Ombudsman costs
  • Third Party Pursuit
  • Loss of documents
  • Corporate Professional Trustees Extension
  • Lifetime run off for Retired or Resigned Trustees
  • Any single claim (as opposed to aggregated limits) basis

Professional Indemnity

Professional Indemnity Insurance is designed to protect you in the event of a breach of professional duty in the conduct of your business and protects you against claims made by clients or third parties because of the impact of negligent services provided or negligent advice offered by you. As examples:

  • If you provide advice and consultancy – customers can claim compensation if there is a mistake in the advice that has been provided.
  • If you provide an expert service - customers can claim compensation if there a mistake in designs, plans or calculations.
  • Confidential information is handled – You could face claims if you accidentally disclose information or infringe on a client’s legal rights.
  • A customer insists that P.I. is in place – Some customers will only engage an advisor if they have proof of a minimum level of P.I. insurance.
  • Cover may be compulsory - You might belong to a professional body or industry association where P.I. insurance is compulsory. Examples include Solicitors, Accountants, Architects, Chartered Surveyors, Financial Advisors, Medical Professionals.
Claims for professional negligence can be very large and expensive to defend. Their impact may jeopardize the future of a business. Our wealth of knowledge in this sector can be helpful in what can be a very stressful time for a business and its owners.

Public/Products Liability

Public Liability and Products Liability cover can be bought separately but in most cases the two are combined.

The policy provides cover for claims brought against you for your legal liability to third parties for injury or damage caused by your business operations and/or your products.

Losses arising in the UK can run into tens of millions of pounds so having too low a limit of indemnity puts a business at risk due to significantly uninsured losses.

On 7th September 2017, the Lord Chancellor and Justice Secretary announced that the discount rate used to calculate future losses in personal injury and fatal accident cases was to fall. The new discount rate is still to be determined but as stated in the government’s press release: www.gov.uk/government/news/reforms-to-compensation-payouts-announced it is estimated that it could be between 0% and 1%. This will affect the amount of compensation that someone is awarded for a personal injury claim - the lower the discount rate is, the higher the initial lump sum award.

As an example, a 25-year-old female earning £20,000 net a year but so seriously injured in an accident that she can never work again and requires nursing care estimated at £50,000 a year: The previous calculations would have awarded her compensation of £2,096,500. If the discount rate remained at minus 0.75% the award would be £5,205,000 but if the discount rate is reduced to, say, 0.50% the compensation would then be calculated as £3,489,000. Such items as legal costs would be in addition to the calculated amount. The new discount rate for catastrophic injury claims is still to be determined but as can be seen from the example it will have a significant impact.

Any business which has exposure for injuries to either members of the public or sub-contractors has an increased financial exposure due to any reduction in the discount rates, particularly if faced with claims from several injured parties. In the event of a very serious accident your existing Public/Products Liability limit of indemnity may not be sufficient to meet your liabilities. Irrespective of the changes in discount rate your limits should be regularly reviewed, taking into account the worst- case scenario such as multiple catastrophic injuries.

Your business activities or your products could result in exposures outside the UK so that different legal systems and regulations will apply. The most significant example of that is the United States of America where injury awards are multiples of those in the UK, courts are more favourable to claimants, legal fees are significantly higher and punitive damages are more regularly awarded. Although your limit of indemnity may be adequate in the UK, if you are exposed to a claim in the United States of America it may not be.

Sub-contractors can bring claims against you themselves or you can be held liable for their actions so managing the exposures associated with the contractual and legal relationship forms an important part of good risk management practices that we can help you with.