While many businesses are struggling as a result of the pandemic there has been a spike in demand for certain products such as hand sanitiser, and an increase in travel insurance purchases. The regulatory emphasis on treating customers fairly may well be tested in a market where demand outstrips supply and the conduct of companies is scrutinised. The FCA has published guidance on their expectations of insurers that sets out the need to treat customers fairly.
The Financial Ombudsman Service (FOS) published information for consumers and businesses about coronavirus-related financial services complaints earlier this month. While the guidance confirmed that, to date, the FOS has only seen a "handful" of complaints relating to coronavirus, it is continuing to monitor the situation. The FOS is anticipating future complaints about travel insurance policies, other types of medical insurance and goods and services bought with credit where, for example, an event has been cancelled and the customer has sought a refund from their credit provider.
Insurers may anticipate consumer claims to the FOS relating to declination of cover. On a commercial basis, they may also anticipate an increase in coverage litigation as cover for coronavirus-related claims is reviewed and restricted.
Employer liability claims
The way that companies treat their employees is also fertile ground for claims against individual directors and corporate entities. Various employer liability claims have impacted the scope of D&O policies over the years.
Employers will want to give careful thought to how they are minimising risk to employees as part of their plans to manage staff during this pandemic, including the risk of being exposed to coronavirus. This may include a review of company travel policies to ensure that employees are not put at additional risk, and putting in place opportunities for staff to work remotely should it be necessary to close offices for deep cleaning. The government has prepared guidance for employers and businesses on preventing the spread of the virus and what to do if infection is suspected.
Corporate governance claims
Section 172 of the 2006 Companies Act sets out some of the matters a director must have regard to in order to comply with their statutory duty to promote the success of the company. These include, among other matters:
- the likely consequences of any decision in the long term;
- the interests of the company's employees;
- the company's business relationships with suppliers, customers and others;
- the impact of the company's operations on the community and the environment;
- company reputation;
- the need to act fairly as between the members of the company.
The list does not appear to relate to the financial success of the company, and it is still largely uncertain exactly what "success" means and how it is measured. During the Act's passage through the UK parliament Lord Goldsmith, then attorney general, noted that for commercial companies "success" would normally mean "long term increase in value" but could also mean "achievement of a company’s objectives".
Directors and companies would be wise to keep these factors in consideration and under review if they are to avoid liability claims arising from the coronavirus pandemic.