The executive failures they can have disastrous economic consequences for businesses. The decisions of senior managers are increasingly relevant, to such an extent that according to the Hiscox insurer, the highest amount for defense expenses in a claim on your Hiscox D&O policy reached 215,000 euros.
Hiscox unveils the most common mistakes of administrators and executives, as well as the economic cost that they have implied for the companies. These coverages refer to expenses of legal representation and defense, expenses of crisis and restitution of the image, incorrect acts in terms of employment or claims for environmental contamination. Incurring one of these offenses can compromise the integrity of the companies due to the paralysis of their commercial activity, but also of the managers themselves, since compensation and legal costs in many cases must be paid with their own assets.
- Investment problems: One of the most frequent decisions that managers have to make is where to invest and poor budget management can translate into financial losses for the company and possible legal actions and demands for responsibilities. In Spain there have been cases of property developer managers who, after a bad investment decision, have generated large losses to society, being forced to pay up to 300,000 euros in compensation, separate defense costs. In the same way, it may be the case that a decision taken by a manager or administrator without consulting, such as the purchase of machinery for markets without demand, also leads to claims, with the consequent compensation and legal costs.
- Harassment and discrimination: companies are increasingly open and inclusive, with active equality policies in relation to gender and nationality, among others. A lawsuit for alleged workplace harassment, of any kind, may entail legal proceedings and payment of non-pecuniary damages as compensation in the event that it is determined that such harassment has not existed. In some cases it has reached 54,000 euros.
- Bad management of the declaration of bankruptcy: bankruptcy declarations always include delicate situations that must be handled according to the law. A bad management of a company can lead, for example, in the demand of the employees to the managers, making them responsible for the situation and the loss of their jobs, with the consequent lawsuit and defense expenses, which they have reached. in some cases the 150,000 euros.
- Ecological crime: sustainability is a factor that is increasingly taken into account by both companies and consumers. Violating environmental laws can lead to lawsuits, both from individuals and public institutions, which can lead to costly legal processes that can reach figures of more than 70,000 euros.
D&O insurance, increasingly necessary
D&O insurance was traditionally associated with large companies or financial institutions, and it was not considered for SMEs, due to its high costs and the low utility that it was seen. Over the years, the sensitivities and objectives of companies have also changed and with them, the responsibilities of their managers, which now also involve issues such as sustainability, social equality, prevention of occupational hazards and exposure to crisis. As a result of this, new specialized products have emerged, adjusted to the market of small and medium-sized companies, which have highlighted their importance and, above all, their need.
“At Hiscox we realized that it was possible to offer guaranteed insurance to Spanish SMEs and, more important than that, that it needed to exist. D&O insurance is increasingly important and the associated risks do not understand company sizes or the sector to which they are dedicated. Insurance not only helps mitigate the impact of a claim when it occurs due to an error in its management, but also helps to restore normalcy with added services such as image crisis management. It is a comprehensive service and protection not only for companies, but for managers themselves », says David Heras, CEO of Hiscox Iberia.