Best line of defence

Callum Taylor tells Ana Paula Nacif why Hiscox’s Management Liability Portfolio offers companies peace of mind in an uncertain climate

Many businesses, regardless of their size and industry, are feeling the effects of the challenging economic climate. Under certain pressures, some companies may need to make staff redundant or change employment contracts — opening themselves up to the risk of legal action from resentful employees. In such a situation, Hiscox’s Management Liability Portfolio (MLP) could offer vital support and protection to companies.

Callum Taylor, Management Liability Underwriting Manager, is an expert when it comes to insuring businesses against legal action springing from employment issues such as redundancy. He has had an extensive career in the insurance industry, working at both AIG and ACE Europe. Callum has been at Hiscox since May 2006, where he is responsible for introducing the new MLP offering.

“When I joined Hiscox, D&O was seen mainly as an add-on to our professions range of policies,” he explains. “In the two years since we introduced MLP, it’s grown exponentially and there’s been an explosion in our understanding of our customers’ needs.”

Callum points out that in the current economic conditions, employees faced with redundancy are more likely to take desperate measures. In fact, the Hiscox claims department saw employment claims treble between September and December 2008.

“Employees have nothing to lose, so some think they may just as well have a go at their former employer to get some money,” he says. “Damages are also likely to go up as they are often calculated on the basis of the period the employee is likely to be out of work, which in the current environment may be a long time.”

But it isn’t all bad news. While no business wants to be involved in legal action, Hiscox can minimise the financial costs and legal disputes to reduce the damage. The major advantage of MLP insurance, which offers directors’ and officers’ liability cover, employment practice liability and corporate legal cover, is that it protects the whole company rather than just individuals.

The opportunities ahead

For brokers, it’s a chance to provide sound advice to clients. “Clients will be looking carefully at their insurance package to save money,” says Callum. “They will ask their brokers which are the ‘must-have’ insurance products and which ones they can do without.” He adds that MLP appeals because it is a simple-to-use product providing wide coverage, that doesn’t cost the earth. “When you look at the premiums, you realise it’s a small price to pay for peace of mind.”

Callum says that his time working with small businesses has helped him identify ways to tailor an insurance package to their needs – many may not realise that they are inadequately protected by their current policy. “It’s crucial that brokers let customers know about the claims they can face in a difficult environment,” he says.

“For many of their clients, management liability insurance may be more appropriate than a standard D&O policy. This is particularly the case given that claims no longer come only from employees. Government, local authorities and regulators now have more power in areas such as employment practices, trading standards and health and safety. Investors, shareholders and creditors, particularly in cases of insolvency, could be willing to take action, so companies need to ensure they are fully protected.

“An unhappy employee is more likely to sue the company than one of the directors, and that’s when MLP kicks in,” Callum continues. “It’s not only about redundancies — claims can also come as a result of alleged discrimination and harassment.”

Hiscox MLP policyholders get added extras including 24-hour access to the BusinessHR website, a resource offering customers HR advice at discounted rates. “Expert advice on HR matters is essential for SMEs in times of employment difficulty,” Callum says.

For Callum, the major benefit of the Hiscox claims service lies in the expertise of the staff. “When a claim arises, MLP policyholders are well protected in terms of coverage, but more in terms of support and guidance. Our in-house claims team has a wealth of experience and knowledge in dealing with such claims,” he says. “Getting correct advice at the right time is fundamental and we at Hiscox recognise this need and have experienced teams and access to expert external advisers.”

It’s never going to be possible to take all the risks out of a business, but having a reliable team of experts to turn to in times of crisis can make the crucial difference between having to shut the doors and keeping the ‘business as usual’ sign up.

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Redundancies — how employers can minimise risk

Employers need to ensure that all HR documentation, such as policies and contracts, are legally compliant and kept up to date. They can lose a case brought against them if they have incorrect or inadequate documentation. If there is no up-to-date statement of terms and conditions, then an additional financial penalty of up to four weeks’ pay may be given to a successful claimant.

BusinessHR can supply up-to-date information on the relevant policies and processes. Once these are in place, employers need to enforce them. For example, not following the statutory dismissal process will result in an automatic finding of unfair dismissal and a potential uplift of up to 50 per cent in any compensatory award.

Employers need to ensure that any selection process is fairly applied, free from direct or indirect indiscrimination and as objective as possible.

If redundancies are unavoidable, employers must ensure that full and proper consultation takes place with affected employees as soon as possible.

Hiscox Management Liability Portfolio cover

• Provides broader cover than D&O, offering directors’ and officers’ liability cover, employment practice liability and corporate legal cover
• Provides broader cover for the company, protecting against regulatory actions, including corporate manslaughter, pension administration claims and employee dishonesty
• Pre-priced proposal form for private companies of up to £50 million turnover
• Clients can pay by interest-free Direct Debit and get cover on continuous policies, eliminating the need to renew the policy each year
• Option to add BusinessHR, which is a valuable online resource for the latest on HR and health and safety policies

 

 

 

 

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