“Caveat emptor applies and appropriate professional advice at the time of purchase is more desirable perhaps than ever before.”
Those were the words of Francis Kean, partner at specialist insurance broker McGill and Partners, in response to the current woes faced by companies seeking to purchase liability insurance for their directors and officers (D&O). In Kean’s view, the matter is not just a question of increasing cost but also of value.
He explained: “As the recent controversy concerning business interruption insurance for small businesses which ended up in Supreme Court has shown, the meaning of the words in the insurance contract matter very much. A less obvious but equally dangerous temptation for insurers in a hard insurance market is to restrict cover.
“When you add into the mix the fact that the D&O insurance policies tend to be long and complex and combine that with the reality that there is often a lack of understanding among directors and officers as to what is and is not covered, there is an increased potential for coverage disputes and bad outcomes in the event of a claim.”
Not all hope is lost, though, despite the challenges in acquiring appropriate coverage.
“It is possible to navigate the D&O marketplace and secure the right amount of protection by engaging with experts who understand how to positively differentiate a company’s risk profile to insurers,” asserted Kean, who has a piece of advice for businesses.
“Time is critical, spend twice as long as you did previously on your D&O purchasing, get to know your insurers and treat them as insiders, commence a dialogue with the new market entrants to familiarise them with your risk.”
