Management Liability & the COVID-19 Crisis

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Across the globe, businesses are being hit hard in all aspects of their operations as a result of the COVID-19 pandemic. Most organizations are dealing with temporary closures or movement to an all-remote workforce, forcing business owners to consider unforeseen obstacles. While the argument for Business Interruption under a property policy is at the forefront of current insurance issues, potential Directors & Officers (D&O) claims are raising concerns in the current business climate.

At this unprecedented point in history, organizations depend on those in leadership roles to navigate through this crisis. However, according to an article from D&O Diary, there are already numerous lawsuits alleging “Companies and their directors and officers and other executives and employees breached their duties to the company or violated securities laws in the context of COVID-19 exposures.”

Whether it’s a lack of action taken by management to adequately protect an organization or improper use of federal assistance, it is important to be aware of all of Management Liability risks related to COVID-19 to manage and prevent claims.

The Risks

The insurance risks stemming from COVID-19 are vast and unprecedented. In the case of D&O, there are several areas of concern facing organizations. These risks are highlighted in an article from D&O Diary.

In this unique economic environment, there is a significant risk for a government investigation which may include subpoenas and requests for documents. In most D&O policies, coverage is only available if an individual insured receives a formal request or is the target of a government investigation. Companies should review the availability of coverage in their D&O policy as the chance of an investigation grows with a changing economy.

Many businesses in hospitality, retail, travel and real estate sectors are facing dire liquidity and credit crunches which could lead to insolvency and bankruptcy. In the event of these circumstances, a company and its officers could face legal action from creditors, shareholders, the bankruptcy trustee and other stakeholders. There must be sufficient D&O coverage for individual insureds to avoid risking the loss of personal assets due to insufficient coverage.

Antitrust Exclusions

Historically most D&O policies have included a broad “antitrust exclusion.” As the D&O market has matured more and more private company D&O forms have removed such exclusions, provide full or partial antitrust coverage.   As the COVID-19 situation continues, there is an increased risk for antitrust claims and is worth knowing if it is provided in a coverage plan. Price fixing, price gouging and other unfair trade practices are all risks. Companies should analyze exclusions in their D&O coverage.

Cyber and Data Security

With the move to a largely remote workforce and the country’s attention fixed firmly on COVID-19, the conditions are just right for hackers to strike. Cyberattacks, social engineering and electronic fraud are all issues on the rise as cyber vulnerabilities have increased. Executives and management play a key role in ensuring their company’s cyber and data security standards meet legal requirements and comply with appropriate laws. Failing to do this could result in action taken by shareholders and customers. As a result of this, D&O policies that include cyber extensions or stand-alone cyber policies should be reviewed or considered if they are not already in place.

COVID-19 Related Lawsuits and a Hard Market

Prior to the COVID-19 pandemic, the D&O marketplace was already beginning to harden due to years of poor results, increased claims activity and rising costs. As uncertainty continues to grow in the wake of COVID-19, these trends will surely be exacerbated given an already stressed market.

The Securities and Exchange Commission (SEC) encouraged public companies to disclose the impact of the coronavirus on their operations and financial condition, even with the future being uncertain at this point in time. Several lawsuits have already been filed against various organizations alleging misleading statements about COVID-19.

CRC Group, a wholesale and specialty insurance market, is already observing several marketplace trends, including:

In an already hardened marketplace, mitigating D&O risk is important to the viability of an organization. CRC Group recommends these actions to reduce D&O exposure.

What it Means for Renewals

The increased risk for D&O claims could make a significant difference when it comes to renewal time. With the potential for D&O litigation relating to this pandemic, we expect D&O underwriters to factor the risk of COVID-19 into their underwriting assessment of each insured company. We recommend companies be prepared to address COVID-19 and the impact it is expected to have on the business in advance of any upcoming D&O insurance renewal.


Navigating through the COVID-19 crisis will be challenging on all fronts, and we’re here to help answer any questions regarding your D&O coverage or other Management Liability concerns. Talk to your trusted RCM&D advisor today for more on how you can protect yourself and your business during this challenging time.