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In this edition

Insurance bonds revisited
Insuring your most important asset Part 1
New work, health & safety legislation
End of Year checklist
Changes Alert! Recent changes that may affect you.
Insuring your most important asset - Part 2
Insurance in superannuation
Annuities as a retirement income stream
The value of obtaining financial advice
The importance of having the correct personal cover - case study
General insurance claims scenarios
Workers Compensation premium payment tips
Directors’ liabilities and the superannuation guarantee
Corporate or individual trustees – the pros and the cons
Collectables in an SMSF

Article brought by Andy Wells

Andrew commenced his insurance career in London during the mid 1960's. He immigrated to Australia in 1970 and continued to be employed in the insurance industry by working for a number of Insurance Underwriters.

In Australia he started as a re-insurance clerk with the United Insurance Company moving on with the various takeovers and mergers with South British and NZI. Whilst with these companies the standard progression of tasks that were performed included Fire Underwriter, Accident Underwriter, Household Underwriter, Surveyor, and also was involved in setting up several computer policy systems.

After 15 years Andrew moved on to GRE as Re-Insurance Manager, then as a ISR and Property Underwriter. Later Andrew was transferred to Parramatta as a Branch Underwriter and Assistant Manager.

GRE was then taken over by Zurich, where Andrew spent the next 7 years before moving on to Broking where he has now been for the past 7 years.

His present position is Senior Account Manager - General Insurance with the Taggart Group Pty Ltd. Andy has successfully completed Tier 1 level for General Insurance & Insurance Broking with The Australian & New Zealand Institute of Insurance & Finance. Andy is a Senior Associate with The Institute and holds CIP status.

Contact details

Website
The Taggart Report
Phone
02 9894 9155
Fax
02 9894 8599
Email
Email us

General insurance claims scenarios

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Directors & Officers Liability

This scenario is for a Pty Ltd internet pharmaceutical company, employing 20 people and an annual revenue of $2 million.  The claim was for unfair competition.

The Managing Director left his former company and started a new internet based pharmaceutical company.  He was subsequently sued by the directors of his former company,  The directors of his former company alleged breaches of intellectual property rights and plagiarism in relation to the products with the MD was marketing on the internet.  It was claimed that these products were a rip off the former company's own product which were sold in chemists across Australia.  The former company issued proceedings in the Federal Court seeking damages in excess of $20 million.

This triggered a claim against the Directors and Officers Liability insurance policy.  The claim was settled at mediation with defendant director agreeing to pay the amount of $1.3 million in damages.  The legal costs incurred in this claim were in excess of $200,000.

This scenario is for a Pty Ltd company with 25 employees and an annual revenue of $2 million.  The claim was for breach of duty of care.

Company A specialised in liquidating troubled assets, such as inventory and fixed assets.  It sold products to Company B.  A third Company, Company C, alleged Company A had already accepted an offer from them to purchase products for $1.45 million and they sued when Company A sold equipment to Company B.  The plaintiff claimed the value was $10 million.

This triggered the relevant clause in the policy.  Company A paid $600,000 to Company C, and $32,000 in defence costs.

Employment Practices

This scenario is for a Pty Ltd company with 80 employees and an annual revenue of $8.5 million.  This claim was for wrongful termination of employment.

A senior manager was terminated for allegedly stealing a laptop computer.  The terminated employee maintained that he was provided with permission to take the laptop home to work on a report.  Passing derogatory comments were made by the owner of the company that the senior manager was too ld and should be 'put to pasture'.  As the comments were made to the terminated manager and in front of two other employees, the terminated employee sued his employer for wrongful termination based on age discrimination.  The employee further alleged he could only be terminated for good cause and maintained a history of superseding his sales targets.  The terminated employee sought damages of $800,000.

This triggered a claim under the policy.  The employer settled with the dismissed employee at a Court ordered conciliation for the amount of $550,000.  The employer also paid $150,0000 in defence costs.

Occupation Health & Safety

This claim is for OH&S issues in a Pty Ltd construction company with 20 employees and an annual turnover of $6.3 million. 

During the construction of a commercial property, an employee was severely injured and left a paraplegic when a pile of debris accidentally fell on him.  The company was subject to a full OH&S investigation and prosecution.

The relevant clause in the policy is triggered.  The company vigorously denied and successfully defended all allegations.  Despite their attempt, the Company was fined $150,000 and incurred $100,000 in legal costs.

Crime

This claim scenario is about a textile manufacturing company with a staff of 220 and an annual turnover of $10 million.  The crime was altering cheques.

Over a period of 5 years, and employee trust accountant misappropriated $850,000 by altering cheques received from debtors.  The employee had a close friendship with the owner of the company and was a trusted friend and employee.  This was the main reason the theft remained undetected for such a long period of time.  The misappropriation occurred when the employee named themselves and members of his family as the payee.  He facilitated the fraud by continuing a cycle of paying debtors accounts with funds from other debtors throughout this period.  This continued until his scheme was uncovered by the company's new auditor.

The relevant clause in the policy was triggered.  The total loss to the company was $850,000.  In this instance, there was no chance of recover from the fraudster as he had not assets and had effectively gambled away the stolen funds.  The investigation and legal costs totaled $150,000.

Insurance is not all about covering your home, contents, motor vehicle and business assets.  As you can see from the above scenarios, there are many other areas that you need to consider cover for if you are in business.  Our brokers at The Taggart Group can help you with any of the above insurance covers, or review your current portfolio with you.  Please give them a call on 02 9894 9155, or email general @taggartgroup.com.au.

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