Bosses face increased risk of Covid-related claims

Adam Young

Small firms are being hit from all sides during the Coronavirus pandemic and just keeping the business running or ticking over is a major challenge. However, one emerging trend is the increased risk to Directors and Officers for claims for alleged breach of duty, neglect, errors and omissions, according to Jarrovian Wealth.

UK insurers are preparing for an increase in litigation targeting Directors and Officers around Covid-19. This follows claims being filed in the US, including one shareholder filing a class action against a firm and its Chief Executive, citing “mis-statements” that the company had developed a Coronavirus vaccine in three hours.

Another involves a fraud class action lawsuit against a cruise company and its chief executive accused of making misleading statements about the virus in a bid to encourage customers to book cruises.

“The UK has tended to be up to 10 years behind the US when it comes to the type of legal claims we see from across the Atlantic, but we are catching up now and won’t be 10 years behind following this pandemic,” says small business expert Adam Young, co-founder and financial planner at Jarrovian Wealth.

With 1,600 rules and regulations directors should be aware of, it’s impossible to keep on top of them all

“Businesses need to be extra mindful of how they address this risk to their directors and employees. A quote I heard recently is very pertinent around this issue: ‘Wisdom consists of the anticipation of consequences’.

“Everything is changing at an unprecedented rate during this crisis and businesses need to act. But that doesn’t mean rushing into decisions around the business and employees without taking the right legal advice, and ensuring you are not putting anyone in the business at risk.

“One potential solution could be to have specialist insurance that will give peace of mind and cover you and your business should a claim arise.”

Awareness from smaller firms is low to the risks that might be involved for those who make day-to-day business decisions which may affect shareholders, customers and staff. Many don’t realise they are not protected by limited status, and if proven negligent the personal wealth of Directors and Officers is at risk.

What can these claims be? With 1,600 rules and regulations directors should be aware of, it’s impossible to keep on top of them all. This means there are many areas where firms could slip up. Claims could include:

  • Non-compliance issues under the Companies Act 2006 – hundreds of possibilities
  • Employment Practice Liability
  • Health and Safety at work
  • GDPR – General Data Protection Regulation
  • Disability Discrimination Act
  • Racial, Sexual and Age Discrimination
  • Insolvency Act
  • Corporate manslaughter

But it’s not just during the Coronavirus crisis that businesses need to be aware. Experts in this area say they are seeing more disputes from shareholders, investors and customers as the UK gets more litigious.

Matt Collins, Managing Director at Ascend Broking, which has launched a new directors and  officers insurance package to help guide businesses through Coronavirus-related issues and the legal implications, says: “One thing is for sure, directors and officers – basically senior members of the team who can make decisions that could affect shareholders or staff – are at risk from myriad exposures, and are not protected by their limited company status from being pursued personally for negligence. This is important for all of business – every day.”

Jarrovian Wealth was established in 2017 but clients have been trusting our experts with their financial lives for over 30 years.