Is it time to review your D&O policy?
The Post Office scandal and the importance of having a robust D&O policy in place
Directors and Officers insurance covers your legal liability as a director or officers of the company, as well as your legal costs and expenses. David Walters, Head of Financial Lines, reflects on the Post Office scandal and the importance of having a robust D&O policy in place.
The Christmas season is widely regarded as being a period of rest and goodwill. For the vast majority that will be true, however, since the screening of Mr Bates vs the Post Office on ITV, I rather suspect that this was not the case for those members of the management team at the Post Office who were on watch during the period that the sub-postmasters were wrongly convicted or maltreated.
The scandal has been unfolding for the last twenty years or so and is now centre stage on the national platform. It is to be hoped that the whole matter is put to rest now in a timely manner.
The miscarriage of justice has also made us reflect on the nature of and construction of a well-drafted D&O policy. Undoubtably most D&O policies would as standard now contain extensions of cover to provide defence costs to company directors in the event of an investigation into the affairs of their company. Additionally, it would also provide defence costs for any allegations made formally against such directors stemming from their stewardship of their company.
The corporate governance bar has been raised in the last twenty years and there is a greater focus on environmental, social and governance issues. In this light it is unlikely that the behaviours that are now being uncovered will be judged kindly.
However, all D&O policies are underwritten on a ‘claims made’ basis meaning that a policy has to be in force for cover to attach when a claim is made. They also will contain a provision requiring that claims or circumstances that could give rise to a claim are notified as soon as practicable.
We do not know if the Post Office has a D&O policy but if it does, it is likely that any cover being afforded for the ongoing inquiry and or future prosecutions of senior management will be granted by a past D&O policy, assuming the matter was notified to insurers at the time that management became aware of the potential for problems to arise.
In conclusion, the matter seems to us to be potentially covered but we would urge all clients to review their D&O policy to ensure that the coverage for representation at investigations is as wide as possible and also to fully understand their obligations in the unfortunate event of a claim situation arising.