QUESTION: ASK YOURSELF THESE

Do you ensure that all your employees are treated fairly? As your well informed of the well-being of your employees?

Can you trust that all your HR Managers and Line Managers act in the best interest of both the employee and the company?

Are you fully aware of the Employment Act 1955, the Industrial Relations Act 1967, and other rules and regulations that govern your HR practices and processes? If YES, do you or your HR and Line Managers abide by these rules?

Can you ensure that the HR Director or Manager of your company will not make a potential Industrial Relations MISTAKES?

Have you answered ‘NO’ to any of the questions above?

It is important to realize that no matter how prudently you act and how strong your HR acumen is, any HR Manager’s decision can result in potential Industrial Relations dispute arising from an employment dispute, i.e. “Wrongful Dismissal Claims”.

TRADE DISPUTE RESOLUTIONS

A COMPANY NEEDS TO ENSURE THAT ITS
HR DIRECTORS AND MANAGERS HAVE ROOM TO MAKE DECISIONS

This IR Insurance also supports good corporate governance by making the risks of these decisions manageable and transparent.

What is this IR Insurance?

This IR Insurance is known as Directors and Officers Liability Insurance of D&O in short. D&O insurance policies offer liability cover for company directors and officers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties. Public listed companies can also obtain cover for claims against the company itself for a wrongful act in connection with trading of its securities.

Why do companies purchase this IR Insurance (D&O) cover?

Simply because HR Directors and HR Managers can make mistakes and are often personally legally liable for them. They often have to make tough and complex decisions with huge impacts on the basis of the sometimes-limited information available.

Labour Office audits on the rise

The Labour Office of Malaysia issues over 9,000 non-compliance fines each year from periodical Audits to over 50,000 businesses.

Current workplace landscape

The current workforce today holistically understands their rights and obligations respectively under the Employment Act and will take legal actions if there were any disputes at workplace.

Common D&O Risk Scenarios

Employment practices liability

Inaccurate or inadequate disclosure (e.g. in company accounts)

Shareholder actions

Misrepresentation in prospectus

Reporting errors

Decisions exceeding
the authority granted to a company officer

Failure to comply with regulations or laws

Common D&O Risk Scenarios

Employment practices liability

Inaccurate or inadequate disclosure (e.g. in company accounts)

Shareholder actions

Misrepresentation in prospectus

Reporting errors

Decisions exceeding the authority granted to a company officer

Failure to comply with regulations or laws

WHAT IS COVERED?

The core purpose of a D&O policy is to provide financial protection for directors and officers against the consequences of actual or alleged ‘wrongful acts’ when acting in the scope of their managerial duties.

Who is covered?

All current, future and past directors and officers of a company and its subsidiaries are covered. In specific cases, like securities and employment practices claims, the policy will cover claims against the company itself.

How does the D&O policy work?

The policy grants cover on a claims-made basis. This means that claims are only covered if they are made while the policy is in effect, usually for 12 months.
Retroactive cover. This means that the policy will have an agreed-on, often unlimited retroactive period, covering claims for wrongful acts that took place before the policy’s inception.

Where claims come from?

Who exactly can make a claim varies from country to country depending on local laws and circumstances. In Malaysia, for example, most claims are made over employment practices, many of these are claims made by former employees against companies and even the HR manager. On the other hand, the largest claims are usually made by regulators and shareholder groups.

Third party claims usually jump when a company declares bankruptcy. Claimants will try to hold the executive managers liable for the company’s failure in an attempt to recapture investments or debts owed to them. Liquidators are even obliged to look for and pursue promising claims as a source of liquidity.

Common D&O Exclusions

Fraud
Intentional non-compliant acts
Illegal remuneration or personal profit
Property damage and bodily injury (except Corporate manslaughter)
Legal action already taken when the policy begins
Claims made under a previous policy
Claims covered by other insurance

The D&O policy will pay for

Defense costs

Damages

Costs generated by administrative and criminal proceedings

Costs generated in the course of investigations by regulators or criminal prosecutors

The D&O hISTORY

D&O has long since become a standard product for large corporations. Cover is necessary to enable managers to make decisions without the threat of personal liability constantly hanging over them. Instead of being forced to protect their livelihood by fighting each and every claim through the courts, this cover enables managers to settle these claims quickly and relatively discreetly. Even if a loss is not covered, D&O insurance will be useful because the defense costs for the claim can be covered.