THE International Transport Intermediaries Club (ITIC) has warned that companies operating in the shipping sector should be checking their Directors & Officers (D&O) insurance cover in the light of their continued and increased exposure in the current difficult financial climate to liability claims from a variety of interests, including shareholders, employees, regulatory authorities and associated companies.
In the latest edition of its e-newsletter, The Wire, ITIC cites a number of recent instances which illustrate the value of D&O cover. These include a case in which a shipmanagement company and its entire board of directors, individually, received a claim from shareholders alleging that one or more of the directors were in breach of their duty to act in the best interests of the company in failing to ensure that the company had a reasonably comprehensive liability insurance programme in place to protect its assets.
The year before, two incidents had occurred. An employee had been killed in a car crash while on a business trip, and employment liability underwriters had declined to pay the family compensation based on a provision in the policy which required the company to declare certain information at renewal. Due to an oversight, the company had failed to do this. Later that same year, fire damage to one of the company’s offices had not been reimbursed due to the insolvency of the insurers.
Both claims resulted in significant losses on the balance sheet of the shipmanagement company, and a sum close to $1m was paid in total.
The individual director on the board of the shipmanagement company who was responsible for ‘risk management’ received a claim in person from the company shareholders. D&O underwriters agreed to consider the claim on the basis that the alleged ‘wrongful act’ required a defence. Shortly before going to trial, the case was settled. D&O underwriters agreed that, although the claim could be defended, there was a significant chance that the shareholders would be successful in bringing their action. As a result, a settlement was negotiated for two-thirds of the claimed amount.
ITIC communications director Adam Jacobson says, “Such claims from shareholders often follow in the wake of a poorer-than-expected financial performance by the company. Those in the shipping industry without D&O cover will be especially exposed to liability if they do not have proper insurance protection.”
- D&O cover provides financial protection for the directors and officers of a company in the event that they are sued in relation to the performance of their corporate duties. ITIC’s D&O policy protects individual directors from claims made against them in person, as well as the company which has to indemnify them. It also includes, at no extra cost, coverage for employment practice liability claims from employees alleging discrimination, harassment, unfair dismissal, etc, as well as insurance coverage for the legal costs of responding to alleged breaches of corporate regulations, authority requirements or corporate statutory duties.
ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com.
3rd February 2010
ITIC Press Release PR0110
|For more information: ||Issued by:|
|Charlotte Kirk||Chris Hewer|
|ITIC||Merlin Corporate Communications|
|Tel: +44 (0)20 7338 0150||Tel: +44 (0)1903 50 20 50|
|Fax: +44 (0)20 7338 0151||Fax: +44 (0)1903 50 02 72|