Consider D&O insurance for directors' public inquiry expenses

The time and cost involved in responding to an official inquiry can be significant. However, with appropriate D&O cover in place the cost and disruption to your business can be mitigated.

As the UK takes steps out of lockdown, the government's response to the pandemic has come under intense scrutiny. It seems inevitable that as frustration with the government's handling of the crisis continues to simmer, the prime minister will need to make good on his commitment that some form of inquiry into the official response will take place. Indeed, Scotland's government has already confirmed that an inquiry into the handling of the pandemic in Scotland will take place, while Welsh ministers have also agreed that an independent inquiry should be held into their handling of the pandemic.

While the scope, timeframe and form of any eventual inquiry – or inquiries – is unknown, it is entirely possible that the role of various companies could come under scrutiny. For example, it is entirely possible that companies which supply goods or services to the government or the NHS could become embroiled in any eventual inquiry, or called to give evidence, with potentially serious and costly implications for both the companies themselves and their directors and officers.

D&O policies primarily provide cover for personal liability incurred by the directors and officers of a company as a result of claims by third parties. It is also common for these policies to provide cover for the costs of attending and giving evidence to official inquiries - typically expressed as 'regulatory investigation costs' or similar.

Regulatory investigation costs will often be covered under an extension to the main insuring clause, and may also be subject to specific coverage limits.

The Covid-19 pandemic has also impacted on business trading, with many UK businesses now struggling with the unenviable task of keeping a business afloat while also ensuring that their suppliers and creditors are satisfied. Directors are having to make difficult decisions about diverse challenges such as retention of people, borrowing commitments, listing requirements and exposures to health and safety risks. Effective D&O cover can help provide invaluable protection to the directors of these companies who may, depending on the structure of the business, ultimately become personally liable for some of these risks.

Companies should now check the terms of their D&O policies to see whether cover is available for regulatory investigation costs. They should also review whether the available cover provides sufficient protection to the company's directors for the other risks they currently face