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Claims Examples

As the world’s number 1 D&O insurer we handle thousands of a claims each year – here are just a few examples based on actual events (with any identifying details changed) to illustrate potential exposures.

D&O and entity examples

Breach of contract                           

Our insured catering company was sued by one of its customers, after the customer alleged that the insured had supplied contaminated meat products.  The claim was for over £1,000,000.  We assisted the insured in finding expert solicitors to defend the claim and subsequently paid the solicitors’ costs.  An amicable commercial settlement was ultimately reached, with the insured paying a fraction of the sum claimed. 

Unfair treatment of shareholders                 

A minority shareholder sued the company’s directors claiming directors had taken decisions which had unfairly prejudiced his position.  Due to conflicts of interest we set each director up with separate legal representation and the claim was ultimately settled by the company purchasing the disputed shareholding from the shareholder.  By the time the matter settled, we had paid out six figure sums in relation to the defence costs for the directors in question.

 

Insolvency and disqualification                     

After a company went into liquidation, the liquidator revisited a number of transactions approved by the directors and decided they should not have taken place. The liquidator indicated an intention to sue the directors for a return of the money in question and also investigate potential disqualification proceedings.  We paid to defend the directors (involving substantial legal and experts’ costs) and the claims were subsequently dropped.

Insolvency and disqualification                     

After a company went into liquidation, the liquidator revisited a number of transactions approved by the directors and decided they should not have taken place. The liquidator indicated an intention to sue the directors for a return of the money in question and also investigate potential disqualification proceedings.  We paid to defend the directors (involving substantial legal and experts’ costs) and the claims were subsequently dropped.

Fire safety regulations                     

Directors were prosecuted by the local authority after persistently failing to comply with fire regulations. They claimed that the work required to their premises by the local authority was unnecessary. We defended the directors and eventually an acceptable solution was reached – defence costs were 5 figures.

 

Health & Safety                  

A company and a senior manager both faced prosecution as a result of a fatality at a site operated by the company.  We paid to defend both the manager and the company. The defence costs for each of them exceeded six figure sums. After negotiation with the HSE, the company pleaded guilty to a more minor charge and the manager was exonerated.  We also paid the prosecution costs, together with HSE’s fees for intervention.

Employment practices examples (optional module)

Breach of contract                           

The claimant alleged her employer was breaching her contract of employment by changing the job role without consultation as the claimant had previously agreed the job role at the beginning of the year which was convenient for child care arrangements. The claimant could not resolve the issue and resigned. A claim was filed in the tribunal for Breach of Contract and Constructive Dismissal.

Age and disability discrimination                  

A claimant applied for a position and was advised that the application would not be progressed. Claimant sought further feedback as to reasoning and was advised he did not evidence the required experience. The claimant provided evidence to the contrary but the employer did not respond. The claimant had declared a mental health disability and alleged that rejection of application was directly related to this disability as well as age and a tribunal claim was made for both employment violations.

Whistleblowing                  

A claimant worked for a pharmaceutical company and discovered that drugs were being used on patients under the age of 18 when the specific drug was produced for adults to trial only. The issue was raised with management on numerous occasions by the claimant but no action was taken. The claimant’s employment was subsequently terminated for performance issues but alleged this was due to whistleblowing. A claim was made in tribunal for unfair dismissal and whistleblowing.

Unfair dismissal                

An employee is dismissed for non-attendance even though her employer knows she is pregnant. Her employers claim that the manager who dismissed her was not aware of her pregnancy – although the company fails to reverse its decision when the employee produces confirmation from her G.P. The case is settled for a 5 figure sum.

Discrimination                   

An employee complains of being asked to form an unacceptably close relationship with a client. The employee claims that once they refused, they were dismissed. The case is settled for a 5 figure sum.

 

Misconduct                         

An employee is dismissed after sending a stream of offensive emails to colleagues about one of his senior managers. However the employer failed to follow proper process in dismissing the employee and the case was settled for a 5 figure sum.

Discrimination                   

A female employee is made redundant, she complains she was belittled by her line manager who constantly belittled and insulted her in front of colleagues with cutting remarks and insulting comments. The case is settled for a 4 figure sum.

 

Constructive dismissal                   

A manager claimed he was forced to resign after being poorly treated by his employer. He claimed he was shouted at by directors, that his management capabilities and confidence were undermined in front of staff and that problems he escalated were ignored. The claim was successfully defended with 5 figure legal costs.

 

Crime examples (optional module)

Fraud by a lone employee                               

An employee who processes invoices also has access to the new supplier banking system. The employee sees that when invoices are approved for payment, the financial controller examines the largest payment in detail and then signs the rest. The employee creates a false supplier and makes many small payments totalling thousands of pounds over several months.

Fraud by a lone employee                               

A credit controller who collects late rents on behalf of a client landlord realises that she is the only contact between the bailiff and the client. The employee siphons off some of the rent collected and makes some of the repayment to her bank account instead of the client’s. The employee makes payments to herself for over 3 years and steals over GBP 70,000.

Fraud by an employee colluding with customers                     

An employee’s role includes negotiating discounts with clients up to 20%. The employee approaches his closest clients and agrees that their current discounts of 5% can be increased to 20% on the understanding that the additional discount is split between the client and the employee.

Fraud by collusion with supplier                   

A trusted employee has authority to select suppliers for the company. He channels a large proportion of projects to one particular supplier in return for regular cash payments of several hundred pounds each month. The fraud is only discovered after 4 years and an anonymous tip off.

Fraudulent request to amend supplier’s details                       

The company receives a letter from a known supplier asking it to amend the bank details on record and pay any future invoices to the new bank account. The letter is in fact a forgery but the employee goes against company procedure and fails to verify the authenticity of the letter with the supplier. The bank details are changed and the next invoice received is paid to the incorrect bank account.

Social engineering fraud                 

An employee receives a call from a fraudster purporting to be from the bank advising that fraudulent payments are being made from the business account.  The fraudster requests memorable information to confirm he is talking to a genuine employee. This conversation is then repeated with a different employee who has payment authority and the memorable information for both employees is used to log in to the business’ account and authorise fraudulent payments over £1m.

 

Security response (optional module)

These are just a small number of the possible threats and crisis that a business may face. Having the option of expert security consultants on the end of the phone gives our customers support and peace of mind.

A marauding firearms incident in a crowded inner-city area

Our response consultants would deploy resource to provide client support, including family management, which is of particular importance. Crisis Communications would be engaged to deal with stakeholders within the organisation as well as outside interests such as shareholders and media. Once the situation is resolved, specialist debriefing and trauma risk management services are available to the victims as well as the wider circle of family members, colleagues and staff.

A dairy farm and food manufacturer received a letter threatening to contaminate milk with a poisonous substance unless £5000 was received

Our response consultants would deploy resource to the farm. The communications would be assessed and the credibility of the threat established. A determination also made as to the possible future actions of the extortionist. These would be presented to the client and appropriate actions advised. Specific advice would be provided about Crisis Communications within and outside the organisation with a particular view to reputation protection. Should the extortion proceed, advice on product recall and reputation management and protection could be provided.

A local charity finds their computer files are encrypted and receives a notification saying that access would only be granted after they paid 2 bitcoins

Consultants would be deployed to the charity premises where an initial assessment of the situation would be undertaken. This would involve analysis as to whether the client has adequate backup that could be reinstalled after a system breakdown; failing that, the scope and extent of the data compromised would be assessed. Having understood this, consideration would be given to engaging IT technicians and breach lawyers to advise on compliance issues and reporting timelines.

Pension trustee and employee benefit plan liability examples

Claim by employer against scheme trustees                            

A scheme employer claimed that trustees caused a substantial fall in the scheme value by choosing an inadequately qualified investment adviser.  The trustees were covered for damages (including losses to the scheme), third party settlement and defence costs. They received expert legal advice and put forward a robust defence including points on limitation, lack of documentation in support of the claim and failure to show a clear breach of trustees’ duties.

Claim by employees against the scheme trustees                  

Trustees face claims from a number of employees, because their enhanced pensions lifetime allowance protection has become invalidated – allegedly due to the actions of the trustees, resulting in potentially greater tax liabilities.  Trustees’ defence and investigation costs covered  as well as any damages  established by the employees together with any claim for the employees’ legal costs.

Claim by a disappointed beneficiary against the scheme trustees                     

An employee was absent from work on disability, when the company he worked for was sold and the pension scheme transferred to the new company.  Because of his absence he was not deemed to not be an active employee and not entitled to any scheme benefits - despite having submitted all relevant paperwork and receiving acknowledgments. His family sued the scheme trustees, whose defence costs, damages and costs payable to the family are covered.