INSURANCE
The clauses have typically broad triggers that offer cover for a wrongful act from directors and officers under all three sections of the policy – Side A, B and C – as mentioned earlier. Policy wordings will vary according to insurer: • The bodily injury exclusion – as Covid-19 claims seek damages for indirect financial loss, there should be no coverage impediment in this regard. • Pollution exclusion – precludes claims based on the release or dispersal of pollutants including specified contaminants; may include germs and viruses which may have a bearing on Covid-19. • Conduct exclusion – the exclusion of intentional and deliberate acts will be viewed on an individual basis in relation to Covid- 19 claims.
RISK MANAGEMENT The economic effects of this crisis will require an active and carefully considered crisis management for businesses of all sizes.
On the occasion where individual companies are not endangered by the crisis, they are still faced with the devastating repercussions the company would have on its revenue. Directors and officers will need to establish and/or adapt risk management programmes in the best way seen fit. This will enable them to timeously identify parts of their business that are particularly exposed and implement corrective measures. No director wants to fly blind during these times. As expense pressures grow for even previously well performing businesses, D&O liability insurance coverage is not an avenue to venture into for cutting costs. It has never been more important. Side A coverage is critical as it is the last line of defence for every business’s risk management plan. This is particularly pertinent when bankruptcy legislation precludes the company from indemnifying director and officer losses.
CONCLUSION As directors and officers move through fluid
and changing times, they need to engage their risk management team or insurers on D&O risks and review insurance coverage terms on renewal and going forward. The lingering pandemic and a very stressed economy will make D&O liability insurance more expensive, but it may be far more valuable than it ever was.
VERNON SUBBAN Questions? Vernon@subban.co.za
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