General insurance claims scenarios
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.