We posted something on social media - how interconnected things often are recently. Directors and officers (D&O) insurance is an interesting glue that links apparently disparate situations.
What’s the common thread between a director in a business in which you are invested “doing a Ratner” and the tragic loss of the submarine diving on the wreck of the Titanic? Loss of business value and personal financial risk to directors, how so?
Well, Ratner famously torpedoed his business by an ill-advised speech at a business lunch, he alienated his customers and the business never recovered. As a shareholder you might have wished he’d kept his mouth shut.
The loss of the submarine may have equally troublesome aspects for the remaining directors of the operating company. Businesses sensibly seek to limit their exposure to risk in its many forms. We come across this frequently in healthcare. The submarine operator had their passengers sign a waiver. Doctors have their patients sign consent forms. Both seek to avoid responsibility for bad or in the case of the submarine, catastrophic outcomes.
Are such waivers (consent) legally effective? There is a difference between accepting risk and understanding the magnitude of the risk you are running. In healthcare, we call this informed consent. If you are contemplating an operation, the risk of dying through a general anaesthetic might be acceptable to you for a hip replacement, but not a face lift. By the same token, viewing the wreck of the Titanic is risky and that’s part of the attraction that so few people have done that; that’s one thing, yet the vessel imploding due to not being able to withstand the depth of the dive is quite another… A waiver will not absolve misrepresentation (if that is what has happened).
The challenges of being a director are many and varied and you don’t have to grab the headlines to be exposed. The D&O market has come on in recent years and tailored cover for smaller business is available competitively. If you have concerns please contact us for a chat.
