2024 continued to show the same variety of claims that we saw in 2022 and 2023. As with those years, the constellation of facts in each case is unique, but the examples are instructive:
1) Private Limited Company
Cover Sections Operative: Company Insurance
The claimant was a former director of a subsidiary of the policyholder who was dismissed for gross misconduct. He was also a director of another company which was a supplier of raw materials to the policyholder. The claimant was alleged to have made several serious breaches under his service agreement and was in breach of the duty to act in the best interests of the directorship. Issues of allocation arose, with costs exceeding £25,000.
2) Private Limited Company
Cover Sections Operative: Directors & Officers Liability and Company Insurance
An employee was electrocuted and died. The HSE investigated and fined the policyholder. The CPS subsequently brought a charge in relation to the death. A guilty plea under Regulation 4(3) of the Electricity at Work Regulations 1989 and 33(1)(c) of the Health and Safety at Work etc. Act 1974 followed. Elements of the claim (defence costs) were covered under the Management Liability (“ML”) policy, which exceeded £50,000.
3) Private Limited Company
Cover Sections Operative: Company Insurance
A clothing manufacturer sent notice to the policyholder alleging infringement of their trademark. The claimant believed that a diamond used on skiing apparel was visually too close to their own and amounted to passing off. A cease and desist letter had to be managed by lawyers with defence costs reaching £30,000.
4) Private Limited Company
Cover Sections Operative: Company Insurance
The policyholder entered into a contract to develop a product. The contract was terminated several months later. The claimant sought a return of the money they had expended on the development costs and materials, which was refused by the policyholder. The claimant issued proceedings against the policyholder without their knowledge and a CCJ was entered, even though proceedings had not been served. The CCJ needed to be lifted and the claim defended. The breach of contract defence costs cover assisted the policyholder in appointing a high quality lawyer, with costs over £18,000 incurred.
5) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The policyholder entered into administration. It was alleged they owed money for services they had received and that a former director of the policyholder had personally assured the claimant, in front of witnesses, that he would pay any debt which the policyholder was unable to pay. The insured person denied making the statement. The appointed solicitor believed allegations made were vague and poorly articulated with no legal claim set out. Section 4 of the Statue of Frauds Act 1677 provides that a guarantee must be in writing and signed by the insured person, but the claim was aggressively pursued. The demand was successfully defended, with costs in excess of £15,000.
6) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
A director, who was also a shareholder, was dismissed for gross misconduct, along with his wife, who was an employee. Along with employment tribunal claims for unfair dismissal (managed under the Employment Practices section of cover), an unfair prejudice claim under The Companies Act was filed, attempting to force the purchase of shares. On complex claims such as these, it was important to ensure a law firm with the necessary level of experience was appointed. Although costs of the claim were in excess of £250,000, these could have been much higher had solicitors unfamiliar with this type of claim managed the case.
7) Private Limited Company
Cover Sections Operative: Company Insurance
A construction firm used social media to showcase project work that they had completed. They received a letter before claim on behalf of the owner of what were alleged to be copyrighted soundtracks, seeking damages for the unauthorised use of the music. Over £50,000 was sought in damages. The Directors & Officers Liability section of cover has no inner limit on cover, but the claim was made against the entity, cover for which extends to a £100,000 sublimit on defence costs. Costs to settlement were over £35,000.
8) Private Limited Company
Cover Sections Operative: Company Insurance
The policyholder was found to have been releasing more than the permitted amounts of waste at their treatment plant. The local water authority had been monitoring the levels following a previous site visit and issued a summons in lieu of a prosecution for breach of consent. Pollution defence costs of £50,000 were incurred under the policy.
9) Partnership
Cover Sections Operative: Partners, Members, Directors & Officers Liability
Although employment claims will almost always be paid under covers for the employing entity, on occasion they can trigger D&O sections of cover. In this case, a claim brought by an employee for injury and discrimination (most typically where these triggers occur) named an individual director. Although the claim amount was £25,000, over £75,000 defence costs were paid under the policy.
10) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The policyholder received a letter of claim from their former Chairman asking for outstanding fees to be paid. The fees related to a fund raising and were documented within the board minutes, which the claimant had written himself. The minutes stated the fees were to be paid within 10 weeks of the close of the raise. However, the fundraising had taken longer than expected and was also incomplete, leading to a disagreement over payment. Costs to defend the position of the director, which was considered to be strong, still exceeded £25,000.
11) Private Limited Company
Cover Sections Operative: Directors & Officers Liability and Company Insurance
An employee was found unresponsive after conducting routine maintenance work. The Police and the HSE attended the scene but it was unclear as to how the death had occurred. The HSE ultimately decided not to prosecute, determining the death to be accidental rather than negligence based. Fees for Intervention were incurred and paid under the policy, with the claim costs exceeding £75,000.
12) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The policyholder sued a competitor for infringing their patent. The competitor refuted the allegations and responded by countersuing the director of the policyholder on the basis that he was the person who signed the letter to their customers to make them aware of the dispute and the products which were said to have been infringed upon. Costs were over £150,000.
13) Private Limited Company
Cover Sections Operative: Company Insurance
The policyholder was retained to manage and maintain locomotives. Following an accident, damages to carriages and minor injuries to passengers occurred. It was determined that the cause of the accident was driver error. Despite the fact that the locomotive had undergone a full mechanical inspection prior to the accident, the Rail Accident Investigation Branch attended. £11,000 of costs were incurred to protect the position of the policyholder from any potential actions.
14) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
Directors of the policyholder received a letter from solicitors instructed by liquidators claiming misfeasance, unlawful preference and breach of duty. It was alleged directors failed to make provisions for the fact that the cash management strategies might not have been allowable and that movement of funds within the group had deliberately put funds out of the reach of creditors. Although some costs were not able to be recovered under the policy, costs of £250,000 were paid during the course of the claim.
15) Private Limited Company
Cover Sections Operative: Company Insurance
The policyholder received a letter from The Environment Agency regarding a shipment they had made which was allegedly contaminated with metals, in breach the Transfrontier Shipment of Waste Regulations 2007. Despite the allegations containing some misstatements, a mistake had been made and preventative measures were put in place. Although the outcome was that no prosecutions followed, solicitors had to navigate a tricky course through for the policyholder, costs of which came to over £15,000.
16) Private Limited Company
Cover Sections Operative: Directors & Officers Liability and Company Insurance
A supplier of the policyholder issued a claim form for outstanding fees on cancellation of the contract. The agreement in respect of which these were due had been signed by one director without the knowledge of the remainder of the board. The board held the individual responsible for the amount, in excess of £1,000,000, for breach of fiduciary duty and negligence, having failed to consult with the board or with legal advisors before signing. The claim also triggered the breach of contract defence costs on the Company Insurance section of cover. Claim costs were almost £500,000.
17) Private Company
Cover Sections Operative: Directors & Officers Liability
The claimant alleged that the defendant director had deliberately marketed themselves as a company owned by the claimant and traded on the reputation and goodwill of that company. They issued proceedings demanding the court enforce a name change and issue an acknowledgement that the defendant company in no way related to the claimant’s business. Defence costs and settlement totaled in excess of £100,000.
18) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
Three minority shareholders threatened legal proceedings against the directors of the policyholder for Unfair Prejudice under s.994 of Companies Act. The main allegations were that fundraising rounds were not genuinely required and were actually designed to dilute their shareholdings (even though the claimants had full rights to participate in the share issues but chose not to). The allegations were strongly denied but the claimants pushed for the purchase of their shares and for compensation. Despite barrister advice that the claimants cases was weak, with little chance of success if it were to proceed to court, the claimants persisted. Costs of the claim were over £300,000.
19) Club/Association
Cover Sections Operative: Trustees, Directors & Officers Liability
A member was removed from the committee of a club because of their conduct. A claim alleging unfair treatment followed. Shortly afterwards, the committee was replaced by a new one which concluded that the previous committee had not acted in the best intertests of the club. Notwithstanding this, the claim dragged on for some time in an attempt to clear the name of the member. Eventually, it was agreed the claim would be withdrawn on the basis of no order being made for costs, but this was not before costs of £60,000 had been incurred.
20) Property Management Company
Cover Sections Operative: Directors & Officers Liability
The company managed a block of flats which had the option to purchase the freehold. Not all owners took up the offer, so one of the directors purchased them via a newly established company. Any future sale of the non-participating flat freeholds would therefore accrue to the company at rates higher than the original participating offer. As a director of the property manager, it was alleged that this was a breach of fiduciary duty. Costs of the claim were £72,000.
21) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The policyholder entered into administration and liquidation followed. The liquidator filed a writ against the defendant to recover money on the basis that the defendant breached his duty as director of the company by making a payment to the parent company when it ought to have been known this was unlawful. Costs were over £85,000.
22) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The insured person held 100% of the shares in the policyholder. An agreement was alleged to have been made to allocate 10% each to 2 fellow directors. No formal contract existed to support this, but reference was made to this in letters and emails between the directors. The business entered into administration and was bought by the major shareholder. Following a meeting, the directors were offered 2.5% of the ‘new’ company, on the basis no formal agreement existed and they were not entitled to roll any shares forward. Costs of over £100,000 were incurred in the settlement of the dispute.
23) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
A plaintiff alleged that directors of the insolvent policyholder negligently overstated the company’s profit and understated creditors. This allegedly false information induced the claimant to extend a line of credit that they argued they would not have done had they known the real position of the company’s finances. Costs of the case exceeded £300,000.
24) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The managing director of a subsidiary of the policyholder alleged that the defendant director breached both his written employment contract and oral agreements by failing to fulfill a management buyout. A trade buyer purchased the subsidiary at a lower price than had been agreed with the potential purchaser. Costs of the claim exceeded £100,000.
25) Private Limited Company
Cover Sections Operative: Directors & Officers Liability
The claimant provided the policyholder with patent protected services for many years. On cancellation of further orders, it became apparent that the policyholder was using the technology to produce the services in-house and had hired staff of the claimant to support production. Allegations including wrongful appropriation of the claimants trade secrets and tortious interference with trade. Defence costs and settlement exceeded £200,000.