The threat of expensive litigation means more directors of sports clubs are demanding D&O cover, according to the grandfather of insurance.
According to Lloyd’s of London, boardroom spats and missteps frequently splashed across the newspapers can now mean being on the board of a European football club can be a high profile position.
Directors and executives at football (soccer) clubs today bear significant responsibilities - and potentially significant risks, as some find out to their cost. That’s why executives at German football clubs increasingly are looking to cover the cost of legal proceedings, just in case they fall foul of governance rules, or trip up with a bad decision.
“The trend for clubs to become limited companies,” says Dieter Prestin, managing director of Dieter Prestin Sportsversicherungsmachler (DPS), one of Germany’s leading providers of sports insurance. “As well as other smaller firms involved in the sport – for example in marketing - means that demand for D&O cover has increased a lot.”
The growth of football as a major industry means that the potential liabilities of those involved has increased. Dr. Joseph Schilling, managing director of the specialist underwriting agency AssPro managerline, agrees.
“In the past in Germany, fewer football clubs were as profit-oriented as today,” says Schilling. “Today, more clubs are organized as commercial companies and as a result their executives are exposed to liability risks in the same way as their counterparts in industrial and financial companies are.”
A recent high profile case involved Uli Hoeneß, the then president of European football champions Bayern Munich. He was sentenced to three years and six months in prison for tax evasion after he admitted defrauding German tax authorities of millions of euros. (continued.)
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But directors of football clubs can find themselves involved in litigation for all sorts of reasons including player transfers that go wrong or because of problematic stadium construction projects,. And cases of litigation are not restricted to the managers of top clubs.
AssPro managerline insures a dozen Bundesliga (German league football) clubs, but Schilling recalls a recent case involving a German second division club.
“In Germany, all league clubs must be licensed annually after filing certain figures,” says Schilling. “The managing director of this club did not file his figures on time so the licence was revoked and the club was punished with relegation to the third division. As result the managing director was sued.”
The directors of football clubs – or other sports clubs such as basketball or ice hockey, for that matter – are increasingly aware of the legal risks they run and the need for specialist insurance to cover potential legal expenses.
“The problem for management looking for D&O cover is that the sports business is different to other areas of commerce and ‘standard’ cover is not always appropriate,” says Dieter Prestin. “It is important to be able to speak the language of sport.”
As a Lloyd’s coverholder and an underwriting agent respectively, both DPS and AssPro managerline have access to the market’s specialist D&O underwriters.
Making sure that executives have adequate and appropriate D&O cover benefits the club itself, says Dr Schilling. “In Germany the company is allowed to buy the D&O cover for its executive managers and also for the supervisory board members,” he says. “So if a club wants to attract and retain the best people as directors, it has to provide the best D&O cover.”
