4 minute read
LAW
But the online document management system also comes with its challenges – there are some difficulties with the online system and the profession is consistently engaging with the court staff members to tweak it, and to educate users, and to make the system more user friendly. With time these creases will be ironed out, but in the interim, whilst they exist, they create much frustration for the legal professionals and clients affected. But one must persevere and find creative solutions to these problems. One can only move forward.
CONCLUSION
Digital transformation could revolutionise the legal profession and its ability to sustain the latest legal developments is self-evident. Automation of records, outsourcing of repetitive duties to machines and the opportunity to efficiently perform legal duties remotely will save all legal professionals and clients, both time and money. Law firms should be willing to press ahead with the enhancement of technology in practice, especially in the long run and not only as a temporary measure due to Covid-19. Although fraught with difficulties, we must accept as the ‘new normal’ that legal professionals will increasingly be called upon to provide digital-based services to their clients, and where challenges arise as a result, we must persevere and pioneer, for the sake our clients, and justice as a whole.
D&O LIABILITY INSURANCE CRUCIAL DURING COVID-19
As the risk of claims against directors and officers is slowly rising, so to is the value of liability insurance. In fact, it has never been more important, writes VERNON SUBBAN
As South Africans move down the levels of national lockdown to curb the spread of a lingering pandemic, the economic impact remains severe. Businesses had to grapple with office closures, collapses in supply chains, fall in consumer demand, remote working, travel restrictions and more. How swiftly and efficiently directors and their senior management have reacted to these challenges will take centre stage not only in the months to come, but also in the years ahead. The robustness of their crisis management policies and business continuity plans will be tested. Headlines have focused on the buzz around business interruption claims due to the Covid-19 crisis, while claims against directors and officers have slowly been on the rise. Will their directors and officers liability insurance be able to assist with the pandemic-related claims?
The full impact of the pandemic and the lockdown on D&O liability insurance in South Africa is not clear cut currently, however globally in particular the US, claims against directors and officers have gained momentum, holding them personally liable for losses arising due to the economic crisis caused by Covid-19.
D&O insurance offers cover for directors and their officers / their management team from claims which may arise from the decisions and actions taken within the scope of their regular duties. It does so under the following three instances: • Coverage for director’s or officer’s personal liability or Side A – when claims are made against directors and officers for wrongful acts where indemnity from their insured company is not available. • Company reimbursement coverage or Side B – the insured company will indemnify the director or his officer and the company will then be reimbursed by the insurer/policy. • Securities entity coverage or Side C – this is for companies who issue or raise new capital. Who is covered or who is the insured? • Past, present and future directors • Non-executive directors • Employees in management or supervisory capacity / officers What is covered? • Costs and expenses of the insured – defence costs • Allegations of a wrongful act • Financial losses for which the insured is held liable
POSSIBLE CLAIMS THAT DIRECTORS AND OFFICERS MAY FACE DUE TO COVID-19
The risk of breaches of duty by directors and officers grows in a time of crisis. There are a myriad of ways that directors and officers’ breach of duties can unfold during the pandemic and lead to claims from shareholders, clients and other stakeholders and third parties (employees, SARS, trade unions, competitors and so forth): • Failure to implement effective safety and health precautions to prevent the virus from spreading among employees and clients • Not having adequate risk management programmes in place and not being able to develop adequate contingency plans – like ensuring safe remote access to the company’s IT system when staff are working from home, perpetuating cybersecurity • Failing to properly assess the direct and indirect risks the pandemic posed to the company and its financial performance – doing all possible to mitigate these effects, like adapting products and services offered to address new market conditions, making alternate supply arrangements. Assessing all relevant contractual relationships and identifying any force majeure clauses • Not complying with the Disaster
Management Act and its regulations • Failing to inform shareholders adequately • Failure to apply correct labour laws • Industries hardest hit by the pandemic – travel, hospitality, healthcare and airline industries – will see a huge influx of such
D&O claims.
WILL COVID-19-RELATED CLAIMS FALL WITHIN THE TERMS AND CONDITIONS OF A D&O LIABILITY INSURANCE POLICY?
As the risks for directors and officers increased in the past two years, so have the policy terms and conditions adapted accordingly.
