Bill Midgley column
Sep 9 2003 By Bill Midgley, The Journal
The problems facing far too many businesses over the issue of Directors and Officers Liability cover, far from going away, have become ever more challenging.
The cost of such cover has risen by as much as 30pc over the last year (no doubt more in some cases) and there seems little likelihood that this trend will abate.
The impact on all companies is heavy, but it is particularly felt by small businesses, some of whom find such insurance too expensive to fund, or even possible to arrange. But the impact on larger businesses cannot be overlooked.
The reasons why. Firstly, the continuing legislative controls, some admittedly well-founded, which make business more vulnerable. While the second issue revolves around our continuing move to a more litigious society.
Fast food businesses have been advised to inform their patrons that what they buy and eat may make them fat. Tobacco users already have a well worn path to the courts.
While purveyors of alcohol may find themselves in the same palaces of justice in the not too distant future. How long before vehicle producers, or for those of us who still burn coal fires, become a target? Beware the barbecue!
The rise of the "sue and be damned" brigade seems unstoppable, fired by those legal practices who encourage action on the "no win no fee" basis.
The attitude of courts, particularly tribunals, towards employers often means that a company will look for an out of court settlement, whether having a responsibility or not. A procedure which only encourages others.
While I can see the short-term advantages of this, often instigated by the insurer, the end result will encourage more to seek easy and undeserved money, pushing up the cost of insurance cover - yet again.
So, whereby lies the solution? Government, as ever, needs to take a lead; a point made in recent ministerial meetings by British Chambers of Commerce.
This means better worded legislation and most particularly ensuring tribunals not only throw out frivolous cases, but charge the cost against those who bring them.
A new approach needs to be taken to Directors and Officers Liability insurance, perhaps via the "captive" market.
Large businesses will find this easier to arrange than small, but those organisations which claim to represent or protect their business members are well capable of setting up group schemes.
Such action, however, will only slow the movement to the courtroom. The principal motivating factor is greed, and those who encourage it.
If we are to believe that according to examination results, we are better educated than ever before, with an ability to read, most know that drinking, smoking, or over-indulgence of any kind will damage us. Yet we expect someone else to pay.
That may be true in the short-term but eventually we all pay the price. Some companies will disappear, together with employees' jobs. And prices will reflect increased costs.
