Insurers are increasingly worried about shareholders, employees or
customers bringing coronavirus-related claims against company executives
and are considering excluding the virus from policies which protect the
bosses, industry sources say.
Two cases have been filed in the United States in recent weeks
accusing companies of making misleading statements about the coronavirus
or their coronavirus plans in order to sell products and boost their
share price, while cruise operators, for example, are bracing for claims
from passengers stuck on ships hit by the virus.
More such cases may follow in the U.S. and other parts of the world
where class action suits can be filed, such as Britain, continental
Europe, Australia and Canada, the sources said.
“An uptick in litigation targeting directors and officers across
industry sectors is one likely, and unwelcome, consequence” of the
coronavirus pandemic, said James Whitaker, partner at law firm Mayer
Brown.
Companies who face legal action use directors & officers
(D&O) insurance to pay their executives’ defence costs and any
penalties awarded by the courts.
The global market for D&O insurance in London, the U.S. and
Bermuda, provides for around $600-700 million in cover, said Christine
Williams, Chief Operating Officer for broker Aon’s Financial Services
Group.
But recent years have proved challenging as legal cases and awards
mounted, pushing up premiums and reducing the amount of cover offered,
and the coronavirus outbreak would likely exacerbate this, she said.
While many classes of insurance, such as business interruption and
event cancellation, exclude epidemics, D&O insurance usually
provides cover and brokers said this could be a rare avenue for
companies to recoup costs triggered by the pandemic.
CLASS ACTIONS
A shareholder of Inovio Pharmaceuticals filed a class action
complaint on March 16 against the company and its chief executive,
citing “misstatements” that the company had developed a coronavirus
vaccine in three hours.
An Inovio spokesman told Reuters that the firm developed a vaccine
construct for its coronavirus vaccine within three hours from the viral
sequence being publicly available, manufactured the vaccine and was in
preclinical trials in January.
Meanwhile, a securities fraud class action was filed against
Norwegian Cruise Line Holdings, its chief executive and chief financial
officer on March 18, claiming the company made misleading statements
about the virus to encourage customers to book cruises.
Norwegian Cruise Line Holdings did not respond to request for comment.
Carnival Corp also said this week that it had received, and expected
to continue to receive, lawsuits from passengers aboard the
coronavirus-stricken Princess cruises and additional lawsuits stemming
from COVID-19.
“The pressure on insurers will be significant, while the legal
costs…will also be huge,” said AFL Insurance Brokers Chairman Toby
Esser.
That pressure means insurers are seeking to avoid covering such claims in future.
“We are starting to see insurers looking at the potential for
specific COVID-19 exclusions going forward,” said Beth Thurston, head of
management liability, UK & Ireland, for broker Marsh.
Ian Roberts, managing partner of law firm Clyde & Co Clasis
Singapore, said D&O policies could exclude claims arising from
bodily injury or illness, and insurers may be considering this.
Lloyd’s and other London commercial insurers account for the bulk of D&O business, brokers say.
“D&O insurers in London are trying to have a very broad exclusion of anything related to coronavirus,” a fourth broker said.
However, the International Underwriting Association, the trade body
for London commercial insurers outside Lloyd’s, said feedback from its
members showed few were applying exclusions so far.
“This is a developing situation and things may change in the future,
but currently the market appears to be evaluating exposures by asking
more questions rather than simply excluding,” an IUA spokesman said by
email.
The Lloyd’s Market Association declined to comment.
https://www.marketscreener.com/INOVIO-PHARMACEUTICALS-I-17937428/news/Inovio-Pharmaceuticals-Insurers-fret-as-company-bosses-face-coronavirus-legal-claims-30290043/
