Claims from Third Parties

Commercial partners, customers or even members of the public might consider bringing a claim against an individual person rather than the company.

A marine and transport consultancy contracted to provide services to an oil major. It was later alleged that a director of the consultancy had breached the confidentiality provisions of the contract by passing over sensitive commercial information to a competitor. The consultancy services were terminated and a significant legal action commenced. This alleged not only breach of contract but also a “wrongful act” on the part of the responsible director of the consultancy, thereby resulting in financial loss for the oil major. The individual director denied that he had done anything wrong and asked his employer to indemnify him.

The employer approached D&O underwriters for support. Insurance coverage was provided on the basis that an allegation of a “wrongful act” had been made against an “insured person” (company director). The allegation of misconduct was not admitted, nor had it been proven in final adjudication. The company was obliged to indemnify the director until or unless his misconduct was established. D&O coverage was provided under the company reimbursement provision of the D&O policy. A firm of defence lawyers was agreed upon together with D&O underwriters. Although the oil major’s claim was upheld in the first instance court, it was overturned on appeal and the director was cleared of the allegations made against him. The cost of defence was, however, significant, in the region of USD 500,000.