Worker’s Compensation is not the only type of business insurance impacted by the devastating effects of COVID-19. Cyber Liability and the Management Liability lines, such as Directors & Officers (“D&O”) Liability and Employment Practices Liability (“EPL”), are also being heavily impacted by the waterfall effect of the global pandemic.
In your role as a company leader, your focus is likely on surviving the pandemic financially, while keeping your workforce safe and continuing to grow your business. The last thing you need is the uncertainty of your D&O and EPL policies not protecting you when you really need them. While it’s still too soon to know the outcome of COVID-19 on D&O and EPL claims, the expectation for future claims are disclosures directly stemming from COVID-19. Below are seven areas of risks to keep in mind.
In regards to D&O liability, we anticipate claims that directors and officers failed to:
- Disclose risks posed by the virus that could impair a company’s operational or financial performance
- Example: Norwegian Cruise Line Holdings Limited, sued in mid-March, due to allegations claiming that the CEO and CFO misrepresented the company’s ability to handle the risks associated with COVID-19, as well as failing to disclose instructions given to sales employees to downplay risk to see increase in sales, leading to a class action suit against the cruise line.
- Follow protocols recommended by authorities
- Example: Failing to shut down or stop operations as instructed by the local government and instead, unnecessarily exposing workforce, clients and/or products by not following protocols.
- Develop adequate and timely contingency plans
- Example: Failing to put in place a Return to Work plan that will ensure employee safety and avoid potential outbreaks.
On the Employment Practices Liability front, we expect to see a rise in claims involving the following:
- Wrongful termination or discrimination claiming COVID-19 termination as a pretext
- Disability discrimination claims from employees who do not want to or feel unable to, return to the physical office site
- More claims involving online/virtual harassment in lieu of physical harassment
- Increased wrongful termination claims when employers who accepted Paycheck Protection Program loans terminate employees without impact on repayment terms
All Sequoia clients are assigned a Sequoia Risk Advisor. For questions, please connect with them directly in HRX.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved
