Ahead of the next round of UK-EU talks this weekend, commercial insurance advisory, Mactavish has reiterated its warning to firms to consider more carefully the risk that individual directors could be personally exposed to legal action because of traditional limitations applied to D&O. It is urging companies to ensure their Brexit plans are comprehensive and clearly documented as they may be needed "to defend themselves against lawsuits bought by disgruntled investors, as well as to ensure their insurance remains valid".

CEO, Mactavish CEO, Bruce Hepburn says the insurance risk associated with a "bad Brexit" facing many British companies is huge. "Brexit brings a host of new challenges for British business, and commercial insurance policies – including D&O cover - are bound up in a labyrinth of inter-connected policy definitions, policy triggers and cost categories, so it’s difficult to understand what they are covered for in the event of bad Brexit. In light of this they need to review their existing cover to ensure it is adequate.”

Furthermore, the Insurance Act 2015 introduced new legislation applying to all commercial insurance policies requiring boards to properly investigate their risks and disclose them to insurers. Failure to manage risks properly may lead to lawsuits from customers, suppliers, shareholders or even members of the public.

"This is challenging enough, but if boards are seeking to rely on their insurance to defend against allegations of poor preparation for Brexit, they face a separate but equivalent risk that insurers refuse to pay such claims on the grounds that they did not properly investigate and disclose their Brexit related risks," Hepburns adds.

According to Mactavish, examples of areas that may be material to investigate and disclose include:

1. Special or unusual facts relating to the risk in respect of D&O, product liability, cyber, or business interruption

2. Any particular concerns which lead the Board to want insurance cover for the risk

3. Anything which those concerned with the class of insurance and field of activity in question would generally understand as being something that should be dealt with in a “fair presentation of risks” of the type in question.

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