Why it is important to protect the senior personnel in your business
Increased regulation, advances in employment legislation and other laws coming into force all create challenges for businesses wishing to expand. This is further complicated when set against a backdrop of a growing compensation culture. With many changes happening rapidly, this can create an issue for businesses in terms of previously recommended insurances. These policies may not being able to keep pace and may be at risk of failing to provide sufficient protection. There are four types of cover that businesses should consider when the reviewing their existing insurance programmes: directors and officers liability (D&O), employment practice liability, internet and email liability and commercial legal expenses cover.
D&O cover is essential for any organisation as it provides cover for directors, supervisory and management staff. It will protect these individuals should a claim be made against them for alleged wrongful acts, such as a breach of trust, neglect, error, breach of duty and misleading statements. If a senior person makes a decision that results in a loss either for their business or a third party, i.e. a client, then that person can be held personally and legally liable. To date there has been a relatively low take-up of D&O cover among small to medium sized businesses. A Datamonitor report published in 2013 found that only 21% of the UK SME market purchased D&O but this is expected to increase as business managers look to reduce their exposure in this area.
Another important area of cover is employment practice liability. This is a specific cover that businesses can purchase for protection in a tribunal or other civil cases made by employees. The number of instances where wrongful dismissal claims can be made is growing. As are the types of causes where courts can award damage above the normal limit of £50,000. Businesses should ensure they follow good employment practices to minimise the risk of these claims occurring but this type of insurance can offer business owners further peace of mind.
The technological advancements over the last decade or so have forever changed the way business is conducted. Email and the internet are used on a daily basis and can bring a number of risks that businesses have not necessarily considered, notably email libel, defamation and breach of copyright. There is an insurance policy available to cover these risks.
Lastly businesses can be sued for a whole range of commercial issues including tax and VAT issues, data protection issues and breach of regulations; cover can be purchased for the legal expenses incurred or costs awarded against the businesses in these eventualities.
Having the appropriate insurance cover helps to ensure a business can withstand an encounter with any of these issues, giving peace of mind to managers who can then focus on growth. Working with a broker can help to identify any further risks that a business might face to enable managers to implement any changes or procedures necessary to safeguard the business as it expands.
By Ian Sandham, Branch Director of Bluefin Bath
Member since: 23rd September 2013
The dedicated team at Bluefin Bath provides specialist independent advice on business insurance, home & motor insurance, wealth management and financial planning.