welcome to our charles taylor adjusting webinar an introduction to dno insurance sharing their expertise today we have jane dando chartered specialist adjuster for financial lines jane is based in our dubai office providing financial alliance assistance to our clients with risks in the middle east laura obre is associate associate director professional in financial lines joining us from london today she is both ambassador and a solicitor and specializes in dno and professional liability we are also joined by hattem kedder who has managed a variety of high-value commercial losses within saudi arabia since joining cta in 2010. so to go through today's agenda jane will be doing an overview of the landscape in the middle east and an overview of wordings and then laura will discuss handling dno claims and take you through some claims examples and then we will have some time for q a at the end so like i mentioned please do submit your questions as we go through so i will pass over to jane to get started thanks haley so historically there's been less take-up for dna insurance in the middle east compared to other regions this has traditionally been influenced by the litigation environment as well as the existence of large family-owned groups of businesses who have not necessarily seen the need to purchase this cover however as a result of increasing regulation an increase in litigation a new geopolitical and economic factors the need for dna insurance in the region is increasing one major worldwide change that has affected the dna market is the coronavirus pandemic whilst governments have attempted to mitigate the effects of additional measures put in place to prevent the spread of coronavirus those responsible for managing businesses have faced a number of challenges which include protecting the health of the workforce ensuring businesses run to the best of their ability and dealing with the slowing of the supply and demand chain there's also been an increase in cyber crime across the region we have recently seen directors taken to task over i.t security as well as how they have handled major cyber breaches after the event whilst the impact on share prices cannot be avoided whilst the global economy faces a downturn directors are facing increased scrutiny over the decisions that they make and their effect on key stakeholders profit levels and share prices regulatory developments have also had an impact and there's been a number of regulatory changes across the region as some countries have sought to attract both foreign and domestic investors and to put mechanisms in place to regulate the financial services industry one example of this is the saudi arabian capital market authority's introduction of a new class action regime for claims by shareholders of listed companies in the country there has also been an increase in regulatory investigations particularly in relation to allegations of fraud money laundering and embezzlement as a result of these factors the market has significantly hardened over the last year premiums are drastically increasing retentions are increasing and wordings are becoming narrower i'm briefly going to give an overview of cover under dna policies before handing over to laura who will look at claimed handling in further detail so who is the insured and dna claim there was previously a common conception that the insured only included those with the job title of director or officer however wordings have evolved and some are broad enough to include other job functions with decision-making responsibilities as insured persons whilst the definition of an insured person depends on each specific wording insured person can now include those named as the director partner member or officer a person who holds themselves out to be a director and acts as one who has not been formally appointed as one a shadow director which is a person in accordance with whose directions or instructions the directors of the company are accustomed to act the lawful spouse of any director solely because of their spousal partner relationship following a claim against that person and the estate heirs or legal representative of any director or officer who has died will become incapacitated insolvent or bankrupt but only for a claim against that person it's important to make sure that the person was an insured person at the time that the wrongful act notified was undertaken so what type of liability can be involved dna insurance policies offer cover to protect insurance and all their companies from claims which may arise from the decisions and actions taken within the scope of directors regular duties companies purchase dna cover because directors can make mistakes and the cover can provide financial protection against those consequences dna insurance is particularly important if a company becomes insolvent generally directors have a duty to act with reasonable care skill and diligence in good faith and in a manner that promotes the success of a company for the benefit of his owners shareholders depending on the individual director's role this can include decisions on strategy managing the workforce and making decisions in relation to suppliers and customers due to the wide range of duties and obligations of directors and officers there are in turn a wide range of liabilities that could be involved we have listed these on the powerpoint presentation and will be able to explore some of these in the next slide laura will also touch upon wrongful acts as commonly defined in policies later in the session so here is the claiming the first thing is regulatory bodies there are a range of claims that could be brought against insured persons by regulatory bodies which will vary across jurisdictions however these can include claims relating relating to breaches of regulations regarding health and safety insolvency in bankruptcy insider trading regulated activities employment practices and financial reporting next we have investors and shareholders there has been an increase in shareholder and investor claims brought against directors and officers since the 2008 financial crisis claims by investors and shareholders generally arise because investors and shareholders blame directors personally for losses and share value as a result of actions or decisions taken by directors as well as claims for mismanagement claims by shareholders and investors can include claims relating to disclosure for example failure to disclose material information or issuing statements that mislead shareholders and breach of my juicery duties owed to investors or shareholders whilst directors and officers generally have a duty to act in a way that promotes the success of a company for the benefit of its shareholders when it becomes likely that insolvency is inevitable directors and officers generally have a duty to act in the interests of their creditors and liquidators claims by liquidators and creditors can include claims of breaches by juicery duties for example continuing to trade despite knowing there is no reasonable prospect of accompanying insolvency and claims relating to jurisdiction specific bankruptcy laws we would glad that breaches of bankruptcy laws in the uae are criminal in nature and any criminal fines would likely not be recoverable with cover for defense costs subject to individual policy wordings laura will discuss the relevant exclusions later on the last potential claimant we've listed are employees we anticipate a rise in employment liability claims as a result of coronavirus and the subsequent change in working practices and locations during the pandemic these claims are likely to include claims under jurisdiction specific health and safety regulations claims allegations relating to a failure to prevent staff from being exposed to coronavirus or a failure to provide adequate protective equipment the policy cover policies generally cover the personal liability of company directors but also the reimbursement of the insured company in case it has paid the claim of the third party on behalf of insured persons cover is usually for current future and past directors and offices of a company and its subsidiaries do you know insurance grants cover on a claims-made basis this means that claims are only covered if they are made whilst the policy is in effect or with a within an agreed extended reporting period general conditions usually contain provisions regarding misrepresentation and non-disclosure the governing law and jurisdiction and an other insurance clause remedies for misrepresentation and non-disclosure so painting an untrue picture of the risk or failing to disclose information which may affect underwriter's assessment of the risk would be governed by the relevant policy law and jurisdiction and a review of information given prior to policy inception and in the proposal form is particularly important where misrepresentation or non-disclosure needs to be suspected as there are so many different types of claims that can engage a dna policy the other insurance clause seeks to restrict cover to elements of the claim that can only be covered under the dna policy common overlaps we see with with professional indemnity policies cyber and employers liability policies where overlapping policies both have another insurance clause consideration of allocation of cross both policies is required dna policies are composite policies which means that each director or officer has separate and distinct cover under the policy directors and offices insurance is split into three types of cover generally referred to as a side a side b and side c they can be brought to stand-alone products or they can be brought as part of a package so side a couple festival this is a typical side a insurance clause insurers shall identify the insured for losses deriving from any claim that results in their civil liability for a wrongful act committed or allegedly committed in the exercise of their duties as directors of the policy holder which is made for the first time against them during the period of validity of the policy unless the insured has been identified by the company for that loss side a cover protects assets of individual directors and officers for claims where the company is not legally or financially able to fund the indemnification for example legally certain jurisdictions may prohibit indemnification or the articles of association within a company may also prohibit indemnification a company may also be insolvent and not have the funds to reimburse the director under side a the insured is the individual named director or officer and there is usually no retention payable so here is a typical side b insuring clause insurers will pay to or on behalf of the company loss incurred by the company arising from any claim for any wrongful act where an insured person has been identified for that loss side b cover reimburses the company to the extent that it in grants indemnification and advances legal fees on behalf of directors and officers it protects the company's corporate assets that are at risk as a result of an indemnification agreement with an insured director or officer the insured is the company itself and there's usually a retention applicable the side c this is a typical site c uh securities claim insurance so insurers will pay to or on behalf of the company loss incurred by the company arising from any securities claim presented for the first time during the policy period in respect of any wrongful act securities claims are those related to shareholder value purchased by publicly listed companies securities claims were not historically defined in dna policies but with an increase in allocation disputes when a company was named as a defendant alongside a director or officer scythe c cover was developed as a product to fill the gap side c provides cover for the company itself when it is named as a defendant in a securities claim and a retention usually applies cover underside c is also sometimes subject to a separate limit it's optional cover and it's not always purchased as part of a dna um policy now going to pass over to laura to discuss claims handling thank you jane i'll be talking to you now about the handling of dna claims and the common issues that we come across but as you will see there is no such thing as a typical dna claim and that's what makes our work so interesting please do drop your questions into the box as haley said as we go and we'll do our best to answer them shortly to start with dna claims are often highly sensitive and often newsworthy so we often see them making news headlines when handling these claims therefore we have to be mindful of the implications of the allegations on the individual and or the company including reputational as i am sure you will all have experience notifications to a directors and offices or management liability policy can be very document heavy with for instance lengthy pleadings numerous invoices complex corporate structure charts and a lot of correspondence records to go through it can therefore be very difficult to see the word from the trees as such we've created some slides to help you with that process first of all we look to see whether a notification being made falls within the policy period as jane explained earlier directors and officers policies are generally claims made policies best way to demonstrate that is by an example say for instance we've recently recently received a shareholder derivative claim that was filed in march 2021 and it was notified to insurers in april 2021 the policy period issue was the first of january 2021 to 31st december 2021. it was therefore within the policy period and was notified in a timely manner we next consider is there a claim this will depend on the policy wording and the breadth and type of cover bought some policies require a proceeding to be filed but often this can include any formal complaint or request for compensation some provide even broader cover to include inspections or investigations however these will normally be defined terms particularly investigations in the policy rather than the dictionary definition of the word if there is a claim within the policy period we then look to see if it involves an insured this can include an insured person or an insured entity or company depending on the type of cover bought jane explained the types of cover earlier but just by a way of quick refresher side a policies will provide cover for insured persons side b is company reimbursement and side c is for securities claims if an insured person has a claim against them we can then look to see if the allegations or investigations relate to their capacity as an insured person we do this by looking at the wrongful act alleged in the complaint or investigation we've set out a typical dictionary definition in this next slide this will be any actual or alleged error misstatement misleading statement acts omission breach of duty actually or allegedly committed or attempted by an insured person as you can see the definition of wrongful act can be quite broad but as always it will depend on the particular wording of the policy at issue if all of these requirements are met policy period a claim and wrongful act we then need to consider if there has been a loss loss can be a demand for damages a claim for compensation or most frequently are set out here for defense costs defense costs are normally incurred when the insured person has instructed lawyers to represent them to provide legal advice and or represent them in any proceedings we're going to now do a quick poll just to see if um you have any questions or what the knowledge is the question is is an insurer's prior consent to defense costs required in a policy is it yes consent's required or no let us know what you think looks like the yeses are winning looking forward to hearing the outcome with this ah so the results are 69 percent of you think that consent is required and 31 they may well those who voted yes are right uh defense costs do normally require insurers consent we can see this by the next slide loss is normally a defined policy term and it is often conceived in conjunction with the words reasonable unnecessary this means that the instruction of law is their rates and costs and cared should be proportionate to the seriousness complexity and quantum of the notified claim insurers tend to have more experience of the types of claims and what would be reasonable unnecessary and can provide advice and assistance to the insurer insurer's prior risk and consent is normally a policy term and it's normally required before lawyers are instructed and defense crossing can be incurred however insurers are required not to unreasonably withhold or delay this consent and now we're going to have another poll can insurers get their defense costs back yes oh so this is much closer 62 say yes uh insurers can get defense costs back and 38 say now well the answer is on this one it very much depends um so yes in theory subject to certain requirements um so the normal situation where an insurer can get defense costs back will be if the conduct exclusion is applicable and this would normally be if there is evidence of dishonesty willful misconduct or fraud then the insurer can reclaim the defense costs that have been advanced however this does normally require an admission or finding at final adjudication and or a final decision at court often after all appellate levels have been exhausted this is obviously quite a prolonged process and um so whilst in theory defense costs are recoverable that doesn't always transpire um defense cross advance will depend on whether there is attention and whether this has been properly eraded as jane said under side a there is generally a nil retention but it does depend on policy wording and also the type of defense costs and so we can see on the slide that there are sub limits so for instance um extradition defense course and may have a sub limit applicable um as can investigations but as always it depends on the policy wording and so the next page if we have all those requirements we have a claim within the policy period there's been a wrongful act and there's been a loss as defined in the policy terms we then need to consider if there are any applicable exclusions on the next slide we've set out some of the the more typical ones that we can see um we've already briefly discussed the conduct exclusion if there is any finding or admission of dishonesty or fraud but we also have um and the common one will be the professional services exclusion and or the pension schemes exclusion these are generally exclusions in a directors and offices liability because often there'll be a pi or a ptl policy which will be more applicable in the circumstances we often also see prime pending litigation exclusion which could apply if the notified claim was known about prior to policy inception fines penalties and sanctions exclusion often feature just because of the nature of the type of directors and officers claims however public policy in the jurisdiction will often dictate whether fines and penalties are recoverable regardless of whether um fines and penalties is allowed for or not in the policy we can often see here as well some more specific um exclusions such as bodily injury property damage pollution war and terrorism and here we have an example of an exclusion so where there is an intentional wrongdoing by an insured person which will be similar to the conduct exclusion and then we have claims already made against the insured or driving from circumstances which student insured was already aware of or should have been aware of prior to policy inception this becomes apparent when and notification has become apparent um is made and coverage investigations are underway if uh correspondence indicates that a complaint was made formally in writing before a claim was actually filed that that would suggest um that there was knowledge beforehand we thought we would create this bullet point list that will help you when considering a notification we've been through most of these issues but we thought it would be helpful to have a handy bullet point for you for future reference it's also worth noting that dna policies often involve a tower and part of the handling of dna claims can involve liaising with insurers inland tower to ensure a consistent and clear message is conveyed to the insured we're now going to give you some claims examples of the type of thing that you might expect to see under directors and offices or management liability policy directors and offices claims can be bought by any stakeholder such as shareholders suppliers competitors and regulators amongst others the directors and officers policy is essentially the last line of defense when directors and officers are accused of wrongdoing in the performance of their management duties and the range of claims they're exposed to and are presented under a date no pulse policy can therefore be diverse often reflective of the type of company and role of the director within that company for instance directors of mines may face health and safety complaints or a claim for corporate manslaughter whereas a director and officer of the pharmacy pharmaceutical company may face allegations of anti-competitive behavior or shareholder clans class actions the australian rural commission has also highlighted the range of claims a directional officer or financial institutions may face um and they've seen um investigations from the government inquiry the asic regulatory body which is the australia's securities investigation committee has been active as a result of the world commission's findings and defense costs in class action complaints we've also seen claims for defence course where directors face costs in relation to extradition proceedings and interpol red notice a government inquiry before a select committee and a shareholder complaint so often directors can face a multitude of um of defense course and need to defend themselves all stemming from very similar allegations um and we've set out here some examples for you so we have insolvency proceedings and we have false accounting [Music] regulatory bodies and in mismanagement of public assets and funds going on to the next slide we have serious fraud office investigations u.s shareholder class actions securities actions and so as you can see there is a wealth of dna claims and you never quite know what you're going to receive and your dna policy but that's what makes it so interesting now i'm going to have a short break for any questions you may have i can see that a few questions have come in so um the first one when should a claim be notified um so a claim should be notified as soon as practicable really so as soon as there is notice that a complaint has been received or an investigation will be pursued and notifications should be made before instructing lawyers i think if you need to instruct lawyers it's generally an indication that insurers need to be involved okay thanks if there are six people who have instructed the same law firm and half are insured persons and the other half are not how would you approach this that's a very interesting one so and if you have cover for some and not others the best way and they all have the same lawyer best way would be have a discussion with those lawyers to identify the allegations raised against in each individual and for them to define the work they're doing for each and provide budgets for each of the notifications so we can identify the total costs incurred and and arrange just to reimburse those that are covered and it can raise issues where there is a dispute between directors and or the individuals raised and also some of the individuals that are covered may face more serious allegations or less serious than some of the others they that will all depend as well but the most important thing is a good relationship with all the individuals notified and their lawyers to determine the crossing card great thank you what happens if there are a number of directors seeking cover under a policy with a relatively small limit it's another interesting question as i mentioned earlier um dna policies are composite policies so each director separately has cover um it depends on the wording really but generally it's a case of first come first served so legal fees are usually paid in the order in which they're received and once the limit has gone there's no cover left okay um what is the role of the loss adjuster in the dna claim ah that's a good question uh well a loss suggests there can help with their review of their notification material which as i mentioned can be quite uh voluminous um our assistants can help or any loss adjusters assistance can help i identify what further information is needed to be able to complete those coverage investigations and move things on in a in a quick way say the insured um can reach a grounding on the coverage position available uh loss adjusters can also monitor developments in proceedings advise on next steps you can also identify any discrete areas that will benefit from a legal opinion uh i guess um as well can assist with any translation issues because if the loss adjusters have a wide range of offices uh with multiple language skills that can assist in in coordinating as well and and a quite helpful rather suggests there can be if coverage is confirmed they can monitor and reconcile defense costs and i had an interesting one about a year ago where we had about 21 individual dnas all counted as insured persons all had separate lawyers which were in care and costs and providing invoices for reimbursement and that was obviously quite an onerous job for the insurer to have to go through and monitor so again that's something that i'll suggest they could assist with okay the next one um what about v80 is this recoverable well uh that very much depends so of speaking from uh england and wales perspective it depends if a company is reimbursing so if a company is reimbursing say the insured person they would normally be able to reclaim the 80 so in which case an insurer would reimburse say defense cross excluding vat but if it was a normally in their side a situation where they weren't receiving assistance from the company in v80 for that reason or insolvency or a number of other reasons can't reclaim v80 then b80 would be recoverable again it depends um when can a claim he brought under a policy um what a claim needs to be um brought within or relate to um the policy period but you can have runoff cover or extended discovery as well so if the claim is made within that time period then um then that will apply but shane says normally you would expect to receive that as soon as practical or as soon as you have awareness of that say ensures awareness is normally a defined policy term as well also under the notification often condition precedent wording as well okay um does an employee count as an insured person so it depends on the policy wording um earlier some policies are broad enough to include those undertaking the roles of the director who have not been appointed as such but um it would depend on the definition of an insured person in the policy and the roles being undertaken by that specific person that the allegations have been made against okay um as misleading is covered in case it has been proven that the misleading act or statement was made intentionally by the insured to induce his client into purchasing a product causing him a loss would this still be covered uh allegations whether unfounded or not would um would be open to defense costs but again if there's a conduct exclusion and there's been any finding of wrongdoing then those costs could potentially be recoverable by the insurer okay um what would you advise an insured who is a first-time buyer of dno and is unsure on how to measure the appropriate limit of liability that should be purchased well uh a breaker would be able to assist there um that's their their role generally so the breaker would be able to advise on the size of the company the type of industry the type of risk they're seeing um for instance whether you should buy side abc or all of them whether you need any specific endorsements added to reflect the type of work the company does um but yeah a breaker will be able to advise first time by his and ensure that the wedding is appropriate breakers often have specific wordings as do insurance companies as well um which are useful as a template and then they can be amended to reflect that the particular company or insurers requirements thank you um can a claim be made against the company instead of the director is that naked or both um yeah it's uh you see a whole range of claims um involving uh under a dna policy it can be insured the company both and there could be a conflict between the two as well as that's something to be mindful of um and that there's other exclusions that might apply in that situation you could have a insured buses insured exclusion okay is the liability of a director limited or capped by law in saudi arabia or are they unlimitedly personally liable i i personally don't know if saudi arabia do you know jane um i will follow up i can see who's sent that question i will um follow up with an email to you afterwards okay um is it possible to pay dno claims without taking legal actions what do you mean if there isn't a legal action but they're in care and defense class i think we might need to contact you to find out a bit more what you mean but but generally uh for defense costs to be recoverable there would have to be a claim as defined in the policy okay uh another one here is it required that the event giving rise to a claim must be within policy period or agreed retroactive period sorry can you repeat that one is it required that the event giving rise to a claim must be within the policy period or agreed retroactive period yes say the claim must be notified uh within the the policy period here or within an agreed extension um how does an insured versus insured exclusion impact policy coverage and what circumstances may be excluded by this uh an ensured versus ensured exclusion often arises if there's um like a director against the director or company bringing the claim against a director so you often see these in in german claims um you don't often see them in policy weddings um it depends on the jurisdiction but um and again it depends on the exclusion but it will be exactly how it says and so however insured is defined it prevents an insured versus insured claim that makes sense great thank you so thanks everyone for sending in questions we i can see that we have had a couple of jurisdiction specific questions um so we will follow up with everybody individually afterwards given the broad audience that we have today um so please also feel free to get in touch with any of the speakers directly afterwards as well if you if you think of any other questions um so we'll close for today so thank you so much for joining us um and like i said before there'll be a short survey to fill out um as the session closes so thanks and enjoy the rest of your day thank you everyone thank