COVID-19: What are the management liability implications?

With the persistent spread of COVID-19, directors and officers in many businesses have had to react quickly to the restrictions on business operations and management of staff. As a result, the robustness of a company’s contingency planning has been, and continues to be tested, from utilising back-up sites to maintain operations during interruptions, to locating staff across different sites to minimise the impact of an outbreak in a single office, or relying more heavily on technology to enable business to continue remotely.

Where there are perceived gaps or failings in contingency plans or management response, a company's employees, clients, and investors may question whether senior executives failed to plan and respond adequately.

Part two of our three-part series on D&O* (see part one here), considers the management liability risks that companies and directors and officers may face as a result of the pandemic, and what action can be taken to help protect themselves and their business.

Risks to Directors and Officers from COVID-19

A directors and officers liability (“D&O”) policy may be triggered by allegations that a director or officer has committed a "wrongful act" in carrying out their duties as directors or officers. In the case of COVID-19, a director or officer could face a claim alleging their contingency planning was unsatisfactory or that inappropriate management decisions were made in response to the pandemic.

Examples of possible alleged failings may include:

  • Poor communication to staff globally, such as an inconsistent and potentially disruptive approach to managing ongoing pandemic risks, affecting the workforce’s health and safety.
  • Not having adequate systems in place to allow access to company servers and systems and maintain business as usual while some staff self-isolate.
  • Dependence on "just-in-time" manufacturing, which has left businesses with no back-up supply, thereby slowing or halting production.
  • Lack of planning on how to monitor systems and controls adequately during increased remote working, possibly allowing for fraud, corruption, or other violations to occur within the company.
  • Lack of cyber resilience capabilities to ensure data security during very high levels of remote access.
  • Inadequate disclosures to capital markets about supply chain or operational resilience.

Any of these perceived failings, and more, could expose directors and officers to investigations and claims arising out of their contingency planning and decision-making.

What action should I take to protect my company and senior management due to COVID-19?

Prepare early for your D&O renewal

As discussed in the first article in the series, even before COVID-19 the D&O market was undergoing significant change with reduced capacity available and increasing prices. The uncertainty of COVID-19 has resulted in insurers being even more cautious with their D&O capacity. Insurers are asking detailed questions about COVID-19’s effect of their insured’s businesses and decision making on renewals is taking more time as underwriters increase the level of scrutiny given to each account.

Accordingly, businesses should work with their brokers to prepare for their D&O renewal early to achieve the best protection possible in this dynamic market.

Consider whether you should notify your insurer of potential claims

In situations where a D&O claim is likely, business leaders should discuss with their risk advisors whether they should notify their insurers of the current circumstances that might lead to a claim in the future.

D&O insurance policies may exclude cover for claims for bodily injury and property damage, but these exclusions are generally narrowly drafted so that claims arising from or relating to bodily injury or property damage may still attract cover under your D&O policy. Also, the exclusion will often not apply to claims for emotional distress or mental anguish in any event. However, the specific terms and conditions of any such policy should be considered, to determine whether any claim against a director or officer relating to management decisions arising from the COVID-19 pandemic may be covered under the policy.

Keep up to date on changing obligations

The government and some regulators are assisting companies by easing the usual reporting requirements and procedures or delaying non-critical regulatory procedures, such as Companies House giving businesses an extra three months to file their accounts.1 Whilst these actions are welcome relief to businesses, such measures are changing constantly and it is important to monitor the changing advice to ensure all obligations are met.

Consider the potential impact on your business

The situation regarding the COVID-19 outbreak in the UK is constantly changing, and even the experts do not have a clear view of what their industry will look like after. Despite this, it is important that business leaders investigate the potential impact that COVID-19 will have on their future business prospects, employees, assets and customers, to name a few.

This process should be constantly reviewed and assumptions challenged as the situation changes. Documenting what decisions are taken, the processes for making such decisions, and the experts who have been consulted to make those decisions may help defend any later claims that decisions were not made properly.

Keep your shareholders informed

Shareholders should be kept up to date on your business’ response and recovery plans related to COVID-19. Failure to keep shareholders informed could lead to allegations of misrepresentations in public statements.

COVID-19 presents significant risks for normal business operations. Companies and their directors and officers should be mindful of the claims that may arise from the management of these risks, and note how their insurance policies may respond to provide protection.

If you would like to know more about management liability and D&O, visit our dedicated management liability page. For more information related to the COVID-19 pandemic, please visit our Coronavirus Resource Centre, which is updated regularly with the latest information and advice on the situation.

*Director's and Officers' liability (D&O) covers you personally for defence costs incurred during a claim and awards made against you. For example, the costs associated with defending trading standards, environmental or other regulatory claims against you; claims by individual shareholders (including other directors); defence costs and awards of claims arising from your personal involvement with the administration of any company pension.


  1. https://www.gov.uk/government/news/companies-to-receive-3-month-extension-period-to-file-accounts-during-covid-19
Webcast replay: Considerations from a Directors and Officers perspective

Expert panellists from Marsh provide a D&O market update and COVID-19 considerations for directors and officers, as well as information regarding current and possible claims from COVID-19 and how to manage a transitioning marketplace.