Brokers advised to familiarise themselves with D&O legal changes

Brokers advised to familiarise themselves with D&O legal changes | Insurance Business

Brokers advised to familiarise themselves with D&O legal changes

Law firm Carter Newell has revealed it is receiving an influx of claims against brokers from directors and officers policyholders who allege they have not received adequate insurance cover.

Partner Mark Brookes said brokers feared that if the insured is denied cover by an insurer it could hold the broker responsible and commence court proceedings against the broker in addition to the insurer.

 “We have been involved defending a large number of claims against brokers, where their clients allege they did not obtain adequate insurance protection,” he revealed.

Brookes believes it is increasingly important brokers are aware of legal changes and precedents, particularly the Bridgecorp decision, in which the courts confirmed that a company can obtain a reimbursement under a D&O policy for their defence costs even if a receiver has made a charge on any insurance proceeds.

He told Insurance Business:  “Brokers need to be familiar with their client’s potential liability exposure and insurance needs, and to be aware of the available alternatives in the market as insurance products evolve.”

Brookes explained that in a soft market, broker and policyholder have scope to negotiate more favourable terms of cover, subject to the policyholder paying the appropriate premium and subject to the insurer’s own underwriting guidelines. 

“For example, we commonly see variations by endorsement to the wording of criminal and fraudulent ‘conduct’ exclusions,” he said.

Noting the changing D&O space, Brookes explained that insurers and their policies were evolving to respond to the demands of the insureds and brokers, particularly where changes in law can sometimes erode some of the benefits of D&O cover.

“This includes for example standalone policies for “side c” cover,” he said, “and for defence costs in light of the recent Bridgecorp decisions currently on appeal.”