Management Liability Insurance

Directors’ and Officers’ Liability Insurance……..Simply Explained

04/04/2012 in Management Liability Insurance

As a director your responsibilities come from a series of statutory, financial and common law duties to ensure that you act in the company’s best interest. If it is alleged that you are negligent in your capacity as director, you may be held personally liable and your personal wealth could be at risk.

You may believe that you can rely on your company to indemnify you but this is not always the case, either because it is against the law or bye-laws of the company or financially they are unable to do so.

Directors’ & Officers’ Liability Insurance protects a companies’ directors, officers and senior managers against claims arising from their decisions and actions taken whilst managing their business. The policy covers defence costs, settlements, damages and claimant costs. It’s basically a legal expenses policy for directors, but where cover is provided for defence costs from the outset and there is no condition of agreement that reasonable grounds for success are needed in order for the policy to pay.

Claims can come from a number of third parties including Shareholders, Employees, Competitors, Auditors, Liquidators and Government & Regulatory bodies to name but a few.

Whether your company is big or small the same laws apply so if you want to protect your own costs, time and reputation then D&O Insurance should be considered.

For help and advice about Directors’ and Officers’ Insurance please contact Adam Lawrence, Client Manager on 0118 916 5484, or complete one of our enquiry forms

Second Corporate Manslaughter Case announced by the Crown Prosecution Service

26/09/2011 in Management Liability Insurance

Another stark reminder that directors should take their health and safety responsibilities seriously as the Crown Prosecution Service (CPS) announce that Lion Steel Equipment Ltd will be prosecuted under the Corporate Manslaughter & Homicide Act  (CMHA) 2007.

The decision follows the tragic death of employee, Steven Berry who fell through a fragile plastic roof panel on an industrial estate on Johnsonbrook Road, Hyde Greater Manchester.

This case is likely to be followed closely as it may provide better indication of the court’s approach to the CMHA and the levels of fines if a conviction is made.  The sentencing guidelines on Corporate Manslaughter issued in February 2010 suggested that fines would be expected to start from £500,000 and rise into the millions.

Management liability insurance will provide legal defence costs in respect of action brought under the Corporate Manslaughter & Homicide Act. For further information contact Tony Gibbs on 0118 9452944 or complete one of our enquiry forms.

Management liability Insurance claims are more likely than fire claims!

19/05/2011 in Management Liability Insurance

I read some thought provoking facts about management liability insurance in this week’s copy of Insurance Times (http://www.insurancetimes.co.uk/issue.asp?navcode=575).

Andy Cullum, Axa Insurance head of management liability risks, stated “You wouldn’t dream of not being insured for a fire, but you are 10 times more likely to be sued by an employee”

The article went on to explain that 80% of larger companies purchase management liability cover, whilst only 20% of smaller companies do.

One of the main areas where insurers are seeing claims is for Employment Practice Liability (EPL).

For further information regarding management liability risks, contact Tony Gibbs on 0118 9452944 or complete one of our enquiry forms.

Insurance for Right to Manage (RTM) companies

02/03/2011 in Management Liability Insurance

The directors of Right to Manage limited companies (RTM) have the same responsibilities and duties as the directors of any other limited company. It is probably more important for them to consider the risks a directorship brings as these roles are often un-paid.

Our recommendation is that directors & officer insurance cover is place to provide defence cost and settlements if a director is held personal responsible for his or her actions.

D & O premiums for RTM companies or generally less than for normal limited liability companies and the premiums are calculated on the number of units within the development.

Macbeth has a range of options, including access to some insurers who will automatically provide the D&O cover as part of a buildings portfolio policy.

For more information contact Tony Gibbs on 0118 9452944 or complete one of our enquiry forms.

First company Corporate Manslaughter ruling results in £385,000 fine

19/02/2011 in Management Liability Insurance

Last Thursdays, Cotswold Geotechnical Holdings was fined £385,000 following its conviction for corporate manslaughter which came earlier this week.

The conviction by jury follows a lengthy trial into the death of Alex Wright, a young geologist employed by the company, on 5 September 2008.  Mr Wright is believed to have died whilst investigating soil conditions in a deep trench, which collapsed and killed him.

Following the ruling there is likely to be an influx of further claims and settlements are likely to increase.

Macbeth can provide advice to directors who are worried about the consequences of this ruling.

How do insurers calculate the premium for directors and officers insurance?

03/02/2011 in Factsheet, Management Liability Insurance

There are a number of different rating factors that insurers take into consideration when calculating the premium for directors and officers and management liability insurance.

The main rating factor is the financial information of the company, as limited companies are compelled to file annual returns with Companies House, the underwriters can obtain this data readily within the public domain.  For companies that are less than 2 years old the underwriters will normally require sight of the management accounts and possibly the business plan.

Another rating factor will be the industry that the company is in; areas for concerning for insurers are companies involved within financial services sector, sports clubs, bio-tech and pharmaceutical companies.

Insurers will also need to know if there are any planned mergers or acquisitions or if any redundancies are likely. If the company has any turnover from the US or has assets there, this will have a bearing on the premium.

Finally, the chosen indemnity limit will affect the premium. The lowest indemnity limit is normally £100,000. Most companies with generally have any indemnity limit of between £500,000 and £1,000,000.

If you would like further information or a quotation for director and officers liability cover, please contact Tony Gibbs on 0118 9452944 or complete one of our enquiry forms.

The difference between Employment Practice Liability Insurance (EPL) and Legal Expenses Insurance

03/02/2011 in Management Liability Insurance

Although it can be purchased in isolation, Employment Practice Liability (EPL) normally forms part of a directors & officers liability or management liability insurance policy.

In order for a legal expenses insurer to provide indemnity under their policy, the policy will state that there has to be reasonable grounds of success. This may be a problem for the policyholder if they have not followed the correct procedures when dismissing an employee or making redundancies.

The EPL section under a directors and officers policy will provide the defence costs irrespective of the likelihood of success. Because of this very wide cover the policy excess is likely to be at least £2,500.

When choosing directors and officers insurance, it is worth checking if EPL cover is automatically included or if it can be purchased at an additional cost.  EPL claims have been steady on the increase and in the short term this is unlikely to change.

For more information on please contact Tony Gibbs on 0118 9452944 or complete one of our enquiry forms.

5 things you need to know when accepting a directorship

03/02/2011 in Management Liability Insurance

1)      It is a myth that directors cannot be held personally liable for their actions

2)      The directors of small businesses are just as susceptible as directors of large organisations

3)      There are over 200 different offences that a director can fall foul of under the Company Act alone

4)       Claims against directors can emulate in a multitude of different ways – Other directors, shareholders, employees, suppliers, Government bodies are a few examples

5)      Directors & Officers Insurance provides legal defence cost and the cost of meeting any settlement

For further information on directors & officers insurance and management liability cover, please contact Tony Gibbs on 0118 9452944 or complete one of our enquiry forms.

What is management liability insurance?

03/02/2011 in Factsheet, Management Liability Insurance

80% of small and medium sized businesses do not protect themselves and their directors and officers against personal claims against them although the list of potential and actual causes of claims is growing rapidly. These range from corporate manslaughter, health and safety, environmental and other governmental or regulatory actions to claims from employees, creditors, suppliers, shareholders and customers. Increasingly the management of businesses is being personally bought into the litigation process on the ‘someone must take the blame’ culture. A limited liability company no longer protects management from unlimited liability.

There has always been a range of covers available but often from differing insurers with potential gaps and conflicts between each one. A new concept has recently been introduced called Management Liability Portfolio Insurance which brings together the three main risks faced. These are;-

• Directors and Officers Liability Covers
• Employment Practices Liability Covers
• Corporate Legal Covers

The policy covers the legal costs of defending the business and its management against a whole range of actions from corporate manslaughter, pollution and environmental problems, to employee and regulatory authorities’ actions. It also pays the costs or financial losses from a number of events such as employee dishonesty, lack of data protection, employee claims, those from other shareholders and many more.

With solicitors widening the net of potential defendants on ‘catch all’ basis, it makes sense to have one insurer and policy covering everyone’s interests. This approach protects the management and the business against a wide range of expenses and damages which could potentially cripple them financially. For further information or a quotation, please contact Tony Gibbs on 0118 9452944 or complete one of or enquiry forms.

Are directors facing increased risk?

03/02/2011 in Management Liability Insurance

A recent poll on the online business network Ecademy, revealed that over 85% of directors perceived that the risks involved in being a director are significantly more than they were 5 years ago. Changes to the Company Act and in legislation relating to Corporate Manslaughter are just some examples of the increased risks that are being faced by director and officers.

The misconception that a director can just simply fold a limited liability company and walk away without any personal liabilities is slowly fading away and prudent directors and senior management are now looking at directors and officers insurance to protect their personal assets, including their homes and pension funds.

To find out more about directors and officers liability insurance, contact Tony Gibbs on 0118 9452944