Real life claims examples for Directors & Officers Liability Insurance
May, 2014
The first time you really test your policy is in the event of a claim; this is when you find out whether it’s right for your company and whether it has any substance or worth. Only then will you see the true value of your policy.
Directors & Officers Liability is in place to limit the financial and emotional impact of a claim.
Here ADF insurance we have complied some real life Directors and Officers Liability claims which have occurred over the last 2 years.
Our first example involves a subsidiary company in the USA. The subsidiary company became insolvent due to the alleged knowledge that directors were aware of the company’s insolvency before declaring so. The claim was issued in the bankruptcy court seeking to resolve the matter, liquidated damages and punitive damages. The allegations that were presented against the directors were for a breach of fiduciary duty to creditors, breach of their contract, fraud and negligent misrepresentation amongst others. The directors had allegedly fraudulently entered into contracts for the re sale of a quantity of cotton bales. With cases being in both the UK and the USA; needing witness statements from all defendants, the claim reached £2,100,000 and was paid under their policy.
Our second claim seen an EU company (plaintiff) alleged infringement of a trade mark, passing off and malicious falsehood. The allegations arose due to the product that the company had been marketing and selling. The name of the product was allegedly a proprietary brand belonging to the plaintiff for whom the company was previously the sole UK distributor. Defence costs were £184,892 and the settlement amount £162,000.
Our final example is a company who entered into various franchise agreements to sell their products. Following poor performance of a small number of franchises and potential damage to the brand and reputation, termination letters were issued to three franchise holders, following legal advice, for breach of contract. Two of the franchisees made allegations of fraudulent misrepresentation against the company and against a director. The basis of the allegations were that the individuals to whom the franchise agreements had been granted were misrepresented as to the potential for business growth and development and that they suffered a loss as a consequence. Defence costs were in excess of £100,000 on a 100% allocation basis.
All these claims were allegations made against not only the company but also the directors. Directors have a level of responsibility to exercise reasonable care, skill and diligence and to act within their company’s constitution. Any breach or negligence against this duty could result in a claim directed to you. Can you afford to be uninsured?
If you are lookign to purchase some directors & officers liability insurance please feel free to contact us. Or feel free to leave your comments and any feedback you may have on the following sites: Facebook, Twitter, Linkedin and Google+.
