During the past several years, there has been an increased frequency of directors and officers (D&O) facing litigation. Possible explanations for this growing trend include a stricter regulatory environment, new laws emphasising accountability and transparency in the wake of the recession, and increased online visibility. Despite this trend, 70 per cent of businesses have no cover to protect their directors and officers from corporate liability risks, according to a Datamonitor report.
But there is some good news. As an unforeseen by-product of this growing trend of claims against directors and officers, insurers have had to expand what was included in D&O cover. Insurers can now offer businesses additional modules to add on to their D&O cover, including employment practices liability, pensions trust cover, crime, corporate legal liability and more.
However, D&O cover is not the only strategy that a business can enact. Businesses should supplement their cover by strengthening their foundation—their employees. Provide them with detailed information on ethical standards, how to behave if offered a gift or hospitality from a third party, the appropriate procedures for dealing with various delicate corporate situations and guidance for how to review the indemnification provisions included in their D&O cover.