The medical industry poses great liability risks because doctors and hospital staff deal with lives everyday. Having Liability Insurance is…
The COVID-19 pandemic has led to significant financial and operational damages in various business sectors around the world.
Many companies have reported drops in revenue at the end of 2020 with foreseen losses continuing this year. Some have need to stop all commercial activities altogether, let go of employees and sell company assets in order to maintain cash flow.
In addition, many businesses have shared that they have received numerous requests for the renegotiation or termination of initial contracts with some requests leading to litigation given the shifts in some employee duties and tasks.
In this context, it is easy to picture conflicts involving directors and officers liability – for instance, with respect to their selection of loss-mitigation actions which may later result in a loss of revenue.
In such situations, it can be difficult to determine which damages were actually because of the company’s decision-makers or which were solely a consequence of the pandemic.
Insurance providers are facing the same challenges as their policyholders. In Asia, insurers have taken the steps to determine the new risks for managers and executives.
There’s increased risk for directors and officers – thus the need for more comprehensive D&O Insurance policy because of the following:
– Company directors may be held liable for losses when they cannot supply customer demand due to COVID-19. Threats of litigation over a supply chain disruption are quite possible for large losses.
– Lay-offs, non-payment of disability pay, and loss of employee healthcare have been a reality for many companies. This opens directors and officers to lawsuits for wrongful termination or breach of contract on a massive scale.
– In the event of essential businesses that require employees to come to work instead of working from home, decision-makers may also be liable when members of their operations staff get sick with the virus. This is especially a liability risk if the company is found negligent of observing proper health protocols.
Watch this 2-minute video to further understand the value of a D&O insurance policy:
In complicated situations such as the current pandemic, directors and officers are held to higher standards of diligence. Their jobs require careful calculations, planning and strategising. There should be a great consideration for the risks of fraud and other unlawful acts.
Thus, the expectation from managers increases simultaneously with the level of severity of a situation in which their decisions are regarded.
As 2021 progresses, more questions have arisen about the scope of a manger’s or director’s responsibilities. What’s certain is that last year’s events have forced companies to troubleshoot unique situations with plenty of uncertainty on how to do so.