Would Directors & Officers Insurance respond if I am held liable as a Director or Officer for loss suffered as a result of my acts or omissions during the COVID-19 pandemic?
Directors and Officers have had to make quick decisions in response to the dynamic nature of the COVID-19 pandemic. Due to the unprecedented nature of this crisis, there is concern that liability could arise as a result of the decisions taken and whether a D&O policy would respond.
The following FA News article (https://www.fanews.co.za/article/covid-19-coronavirus-disease/1425/short-term/1426/could-d-o-claims-go-viral-following-actions-taken-during-covid-19-pandemic/28712) outlined some examples:
- Health and Safety of employees in the workplace and the provision of hygiene products and How far does the duty of care go relative to advising employees on matters of personal hygiene?
- Where does the balance lie between the duty of care that Directors have regarding Occupational Health and Safety and the duty to ensure a financially sustainable business?
- What happens if the management of a business disregards or fails to cooperate with Government directives / regulations regarding COVID-19?
- What about businesses that hike prices, release sub-standard products or act in an anti-competitive manner to profit from the crisis?
The cover afforded by a D&O policy will depend on the policy. In general, a D&O policy will provide cover for an Insured Person’s wrongful acts which means an actual or alleged wrongful breach of duty, error, omission, misstatement or misleading statement including an actual or alleged violation of employment laws or any other legal provisions relating to any individual’s actual or prospective employment relationship with the Company.
The following are usually standard exclusions in a D&O policy:
- Any criminal, dishonest or fraudulent act or omission or an intentional breach of the law
- Any intentional or wilful acts of misconduct or breach of trust
- The Insured gaining personal profit, reward or advantage or receiving remuneration to which they were not legally entitled
- Any bodily injury, sickness, disease, death or emotional distress or mental anguish of any natural person; or damage to or destruction, impairment, or loss of use of any property. (Take note of some policy extensions mentioned below)
Some policies provide limited cover for defence costs for a claim in respect of Bodily Injury and/or Property Damage. Policies may have an Occupational Health and Safety extension which provides limited cover for defence costs arising from a claim or investigation alleging a breach of the Occupational Health and Safety Act or the Mine Health and Safety Act.
In summary, the cover afforded by a D&O policy would depend on the terms and conditions of the policy as well as the facts of the particular matter. Most policies exclude claims relating to bodily injury / illness and property damage but there could be extensions that provide limited cover. For example, “mental anguish, trauma or resulting illness arising out of an Employment Practices” related issue.
All policies do include a Conduct exclusion clause which basically means that if a Director or Officer breaks the law intentionally then there will be no cover under the D&O policy.