Directors and Officers Liability Insurance

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There is a list of claims which are included in the wrongful employment practice claims under director & officer liability policy. Such types of wrongful employment claims can be related to the past, present or future employees of the company. The majority of these claims arise due to any statement which is misleading, any act of omission, negligence or breach of duty committed actually or allegedly by one or more insured person. Other reasons for such claims include an alleged or an authentic error or misstatement by one or more insured.

Following are some examples of wrongful employment practice claims under director & officer liability policy:

An employee may be dismissed, discharged or terminated on a wrongful or unlawful basis by the director or officer. The termination, in this case can be actual or constructive.

There may be a breach of an employment contract. The breach can be due to any oral or written communication. The contract type can be either an employment contract or quasi-employment contract.

Read More: What is covered under a directors and officers Liability Insurance Policy?

There can be an act of misrepresentation which can be employment related. An employee can face discrimination of the following types:

  • Sexual
  • Workplace harassment
  • Racial or national origin discrimination
  • Discrimination based on sex, sexual orientation, religion, maternity, pregnancy, age and disability.

Non-compliance or non-adherence to working hours are also included in wrongful employment practices.

Claims can be made if the director of the officer creates an act of wrongful promotion of an employee. In case a deserving employee is demoted, then this can be claimed as a wrongful employment practice.

Wrongful discipline claims are made in case there is no adherence to office/employment policies with respect to disciplinary actions.

If an employee is deprived of his carrier opportunity by a wrongful act, it can be included as an act of wrongful employment and claim can be made.

Failure on account of the director or officer can be claimed for:

  • Failure to grant the tenure
  • Failure in adherence of policies and procedures related to workplace or employment.

If any officer or director shows the desire to take revenge against any whistleblower or any other personnel, it is characterized as a wrongful employment act.

Other examples of wrongful employment practice claims under director and officer liability policy includes:

  • Negligence in evaluation of the employee
  • Invasion of privacy by the officer or director which is employment related
  • Libel, slander, humiliation and defamation which is related to employment
  • Failure on the part of the officer or director to provide accurate job references
  • Causing mental anguish or emotional distress
  • Unlawful discrimination which can be either intentional or unintentional

Read More: Who are covered under Directors & Officers (D&O) Liability Insurance Policy?

Case Study:

An IT firm was going through tough times as the business was down. Cost cutting was the only choice left for the enterprise. The directors of the firm made a tough decision to reduce the number of employees. Ten employees were sacked based on this cost cutting decision.

One of the female employees who was dismissed approached an employment practice lawyer to file a suit against the directors of the IT firm. She claimed that one particular director had always discriminated against her on the grounds of her gender and religious faith. She claimed this as the reason for her dismissal from the firm.

The directors of the IT firm approached their insurance company as they had bought a director and officer liability insurance policy. Upon investigation, it was found that cost-cutting was the real reason for the dismissal of the female employee. Her gender and religion had nothing to do with the termination process. Hence, the individual director was cleared of any wrongdoing, and the company reached a settlement with the former female employee.