Are There Liability Exposures For Your Board of Directors in Connection with COVID-19?
Government-ordered closures and restrictions on businesses’ operations to mitigate the spread of COVID-19 create a variety of liability exposures for your organization. While the headlines have primarily focused on important issues such as workers’ compensation and business interruption, there has been an increase in claims against directors and officers (D & O) in connection with COVID-19.
Unlike other liability coverages in relation to COVID-19, there is a broad range of claims that may emerge under D & O liability. D & O Liability coverage generally provides coverage for action taken by an organization’s board of directors or officers that someone else thinks are wrong. Most D & O policies that are underwritten for nonprofits also include Employment Practice Liability Insurance Coverage (“EPLI”). EPLI is primarily designed to cover an organization against claims made by workers claiming their legal rights as employees have been violated. EPLI provides protection against many kinds of employee lawsuits, including claims of sexual harassment, discrimination, wrongful termination, breach of employment contract, and wrongful infliction of emotional distress. Typically a D & O policy only requires some type of act, error, or omission which causes a person or entity to sustain damage other than bodily injury.
There is no such thing as a “standard” D&O/EPLI policy. While most D & O policies provide coverage for alleged wrongful acts, including acts of discrimination, financial issues, and policies concerning programs of the organization, it is critical that you review your insurance policy and have a clear understanding of the policy’s terms, conditions, and exclusions.
An organization’s failure to provide adequate health and safety precautions to prevent the spread of COVID-19 can trigger a D & O claim. For example, a wrongful death suit alleged that Walmart failed to properly clean and disinfect the store, implement and promote social distancing, warn employees of the risks of COVID-19, or provide protective equipment to employees, which resulted in the death of an employee due to complications from COVID-19 they contracted while working at Walmart.
Organizations should create and implement a risk management program to mitigate the spread of COVID-19. Your board should be aware of all safety protocols taken to ensure that staff and volunteers are adequately protected. We recommend that you review your handbook or procedures with your employment attorney and HR professional to make sure you are in compliance with federal and state ordinance requirements. As COVID-19 continues to impact business’ operations, directors and officers will continue to have broad liability exposures. Implementing an effective risk management plan will help mitigate exposures. Your risk management plan should also address safety precautions for remote workers. We recommend that your attorney review your D & O insurance policy and also consider increasing your liability limits.
Let us know if you have any questions or concerns regarding Directors and Officers Liability or would like us to provide a quote. We are here to help!