FOREFRONT PLUS. Your guide to our insurance for management risks and liabilities

Transcription

1 FOREFRONT PLUS Your guide to our insurance for management risks and liabilities

2 CONTENTS INTRODUCTION DIRECTORS AND OFFICERS LIABILITY EMPLOYMENT PRACTICES LIABILITY PENSION SCHEME & BENEFIT PLAN LIABILITY CORPORATE LEGAL LIABILITY EMPLOYEE CRIME KIDNAP AND EXTORTION EXPENSES WHY CHOOSE CHUBB? 2

3 INTRODUCTION Running a business can be a thankless task. Directors, officers, senior managers and pension trustees can be exposed to a broad spectrum of civil, criminal and regulatory actions, involving hefty costs as well as consuming valuable time. The wide range of parties who might act against them include employees, shareholders, customers, creditors, liquidators, competitors and regulatory bodies. Even minor acts or omissions can have serious consequences. Businesses are never safe from the threat of fraud or extortion. The internet and the emergence of e-commerce have opened up a whole new risk environment by creating the possibility of cyber liabilities and losses, some of which include: Claims for copyright, trade secret and other intellectual property infringements Defamation claims The risk of investigation by the Information Commissioner Claims and investigations for privacy and data breaches Computer fraud and funds transfer fraud losses caused by third parties Expenses to reproduce or reconstitute data following a crime Costs of handling cyber extortion where someone threatens to interfere with data or to disseminate customer records Comprehensive protection of the assets of both the company and its managers is vital within this increasingly complex and difficult environment. That s why we created ForeFront Plus, an integrated solution for small to mid-sized private companies. Forefront Plus has six sections of cover, each with its own separate limit: Directors and officers liability; Employment practices liability; Corporate legal liability; Pension scheme & Benefit plan liability; Employee crime; and Kidnap and extortion expenses. Backed by Chubb s superior financial strength and award winning claims service, ForeFront Plus provides a one stop solution for the management risks facing private businesses in today s world. 3

4 DIRECTORS AND OFFICERS LIABILITY This policy section provides insurance cover for directors and officers (and in some cases other employees) for: Defence costs and legal liability incurred on account of claims and prosecutions against them in their role in their organisation; and Representation costs in investigations of them by regulators and other authorities. FREQUENTLY ASKED QUESTIONS What is covered? Loss resulting from covered claims against insured persons alleging: wrongful act, error or omission misstatement neglect breach of duty Also, compensation up to a sublimit, payable to the policyholder, for time spent by staff in attending court as a witness or observer and time spent with lawyers for witness statements or for seeing a barrister. What about investigations? Cover is provided for the legal fees and professional charges an insured person personally incurs in their representation at an investigative inquiry into their conduct. This cover is up to the D&O main section limit and is not restricted to inquiries in particular jurisdictions or types of industry. It also provides an insured person with representation costs for interviews by his or her organisation or by regulators or other authorities in connection with investigations by such regulators and authorities. Who is an Insured Person? Past, present and future: directors, officers and company secretaries of the policyholder or one of its subsidiaries employees of the policyholder and its subsidiaries, if they are: - co-defendants in a covered claim - named in an employment claim - acting in a managerial capacity - an Approved Person performing particular Controlled Functions (as specified by the Financial Services Authority) - acting as a senior accounting officer (as defined by Schedule 46, Paragraph 16 of the Finance Act 2009) - alleged to be liable as a de facto director of the policyholder or one of its subsidiaries Are spouses covered? Yes. And not just spouses. Insured person includes the lawful spouse and also the domestic partner or civil partner (as defined in the Civil Partnership Act 2004) of any director, officer, company secretary or employee mentioned above, where that spouse or partner is sued in respect of that person s wrongdoing or omission. 4

5 What limit of cover does the D&O section provide? The financial limit of cover for the policy period (the D&O main section limit) is agreed between the policyholder and Chubb at the time the policy is taken out. Is there any extra limit of cover in addition to that? Yes. The D&O section has two special extra amounts of cover: 1. If the D&O main section limit becomes exhausted, there will be a further limit for the policy period for paying such loss of an insured person as that insured person s company is prevented by law or insolvency from reimbursing. This further limit is usually the lesser of 1,000,000 and 25% of the main limit. It can be applied to such loss, even if such loss arises from the claim which led to the exhaustion of the main limit. However, before the further limit can be called upon, all excess insurance (assuming there is any) must be exhausted. 2. The D&O section provides an additional limit for payment of defence costs only. This limit is usually 10% of the main limit. Can Chubb avoid or rescind the D&O section for misrepresentation or non-disclosure? No. Not even for a fraudulent misrepresentation or nondisclosure. In the event of a fraudulent misrepresentation or non-disclosure, an insured person who knew the true position or the non-disclosed facts and who knew that the policy was being bought (and any company by which that person is indemnifiable) shall not have cover for loss arising from that position or those facts. What cover does the D&O section provide for claims against an insured person by another insured? The section only excludes such a claim if it is made by the policyholder or a subsidiary and is made in the USA or is based on USA law. Even then there are a number of exceptions, including that Chubb will pay the defence costs. How do the extended reporting periods (ERP) work? If the policy period ends without Chubb agreeing to provide, or the policyholder agreeing to buy, a new D&O section, ERPs can provide cover into the future for claims arising from conduct prior to the policy period end. Subject to the policyholder not being taken over, ERPs are available as follows: the insured persons or the policyholder may obtain one year s ERP or three years ERP for a prefixed additional premium; retired insured persons automatically obtain a six years ERP (which is subject to shortening by the purchase of new D&O insurance) from the time the policy period expires and there is no additional premium for this. If the policyholder is taken over, the insured persons or the policyholder may obtain an ERP at a prefixed additional premium, providing cover for three years from the time of takeover for claims arising from conduct prior to the takeover. For ERPs which are not automatic, the time within which the insured persons or the policyholder must elect to obtain the ERP is 60 days from the time the right to obtain it is triggered. When does the policyholder have to report to Chubb that a new company has been created or acquired? Only an acquisition (not a creation) must be reported and only if the new company: increases the total asset size of the policyholder s group by more than 25%, or has debt securities or equity securities listed on any exchange in the USA. Reporting must be within 90 days of the acquisition taking place and will trigger cover, for that 90 days, for the new company and its insured persons. Cover after that will need Chubb s agreement. Other acquisitions and creations do not have to be reported and the new company and its insured persons automatically become insureds. What if the policyholder is bought or merges with another entity during the policy period? The policy automatically provides cover for claims made against insured persons until the end of the policy period for alleged wrongful acts and conduct which occurred prior to the date of the purchase or merger. 5

6 DIRECTORS AND OFFICERS LIABILITY CLAIM EXAMPLES Members complaints Members of a sports club alleged that the club had reneged on a number of key membership benefits. They claimed for breach of contract and accused the club s eight directors of misrepresentation. Defence costs paid were in excess of 93,000. Breach of EU measures Five directors faced criminal accusations of false measurements in order to keep their company within European Union-imposed production limits. After Chubb spent 400,000 defending them the charges against them were dropped. Dispute over family business name A family business (including its name and goodwill) was sold to a third party, with one family member joining the board of the purchasing vehicle. His brother became a director of another company, which was set up to engage in the same line of business, and found himself sued over the name of that company which was similar to that of the original family business and accused of trying to divert business. The dispute was resolved with a name change, but not before the brother had incurred costs and damages of over 100,000. USA subsidiary An American who became the director of a UK company s US subsidiary was alleged to have breached notice and restrictive covenant obligations to his former employer by taking up his new position too soon. The former employer took action in the UK courts against the new US director for breach of contract and against the UK company and its chief executive officer for inducing the breach. The claim was eventually settled, but with defence costs approaching 100,000. Breach of fiduciary duties A company secretary, chairman and another director faced allegations by an investor that they had breached their fiduciary duties as directors by, amongst other things: failing to keep the investor appraised of the company s financial position and the actions taken to ensure its return to profitability; excluding the investor from information about offers for the business; running down the company to facilitate an acquisition at a price dramatically less than historic value; and not acting in the shareholders best interests. Defence costs exceeded 200,000. 6

7 EMPLOYMENT PRACTICES LIABILITY This policy section provides cover for organisations and their covered directors, officers, employees, volunteers and independent contractors (to some extent) for defence costs and legal liability incurred on account of claims and prosecutions against them for wrongful employment practices. FREQUENTLY ASKED QUESTIONS Who is insured under the EPL section? The policyholder and its subsidiaries, directors, officers, employees, officers, volunteers and independent contractors (see below). What sorts of claim are covered? Claims for a wide range of wrongful employment practices, brought by past, present or prospective, directors, officers, employees, volunteers and independent contractors (see below). How does the EPL section deal with independent contractors? First, it covers claims by independent contractors for wrongful employment practices. Second, if an insured organisation makes a request to Chubb within a certain time, and provided the organisation agrees in writing to indemnify the independent contractor, the section will cover an independent contractor for wrongful employment practice claims arising out of their position working for the organisation. How does the extended reporting period (ERP) work? If the policy period ends without Chubb agreeing to provide, or the policyholder agreeing to buy, a new EPL section, the insured persons or the policyholder may, provided the policyholder has not been taken over and that no other EPL cover is bought, obtain one year s ERP for a pre-fixed additional premium. This ERP will provide cover for that further year for claims arising from conduct prior to the policy period end. The time within which the insured persons or the policyholder must elect to obtain the ERP is 60 days from the end of the policy period. When does the policyholder have to report to Chubb that a new company has been created or acquired? An acquisition or creation must be reported only if the new company: increases the total amount of employees of the policyholder s group by more than 10%, or has directors, officers, employees or volunteers in the USA. Reporting must be within 90 days of the acquisition or creation taking place and will trigger cover, for that 90 days, for the new company and its insured persons. Cover after that will need Chubb s agreement. Other acquisitions and creations do not have to be reported and the new company and its insured persons automatically become insureds. Who will defend claims? Chubb has the right under the section to appoint defence lawyers and, for this, has selected high quality, specialist firms who provide excellent service at good value. policy was being bought shall not have cover for loss arising from that position 7

8 Can Chubb avoid or rescind the EPL section for misrepresentation or non-disclosure? No. Not even for a fraudulent misrepresentation or nondisclosure. In the event of misrepresentation or non-disclosure: an insured person who knew the true position or the non-disclosed facts and who knew that the policy was being bought shall not have cover for loss arising from that position or those facts; and such knowledge on the part of a key person of the policyholder or of another insured organisation will cause loss of cover, as detailed in the section, for the policyholder and/or insured organisations. How does the EPL section work in comparison to employer liability insurance? Employer liability insurance is a mandatory insurance for liability for personal injury to employees. EPL, which is not personal injury liability insurance, targets the multitude of other employment liability exposures faced by employers, irrespective of size, location or business activities. Whilst an employers liability policy will only respond to liability for an injury and so will not be triggered by, for example, an unfair dismissal claim (the most common form of employment action) the ForeFront Plus EPL section will respond to a broad range of employment-related claims. Does the EPL section contain an intentional acts exclusion? No. This is because it is frequently the employer s intention to perform the act that gives rise to the employment claim, e.g. the employer intends to dismiss an employee but does not intend to do so unfairly. Does the EPL section stipulate employment practice procedures which must be in place? No. Aren t good procedures protection enough against employment claims? Sadly not. Despite good procedures and controls it is difficult to police everybody all of the time. A broad insurance cover is a sensible part of a comprehensive risk minimisation programme in addition to good procedures and controls. n or those facts; and 8

9 EMPLOYMENT PRACTICES LIABILITY CLAIM EXAMPLES Unfair selection for redundancy The claimant was selected for redundancy and believed the process was unfair. He also raised concerns about the selection panel and the consultation provided. He alleged that the panel members were not qualified to comment on his potential redundancy as they did not know him nor had they worked with him. In tribunal, his claim for unfair dismissal succeeded, but only on procedural grounds. The tribunal found that, in the absence of the procedural flaws, he would have been dismissed in any event. It awarded no compensation, but the employer s legal costs were over 42,000. Protected disclosures A principal consultant was allegedly dismissed from his position on the grounds that he made a series of revelations about safety issues, including site safety, the manner in which investigations were conducted and misgivings about the ability of the safety manager. He sued, alleging that these were protected disclosures and as such he should have been protected under the Employment Rights Act. He said the dismissal deprived him of his livelihood and profession as there was only a limited number of companies he could work for. Moreover, as he was 57 years of age, it was too late to retrain for another career. Although they had what they believed to be a robust case, the employers defence costs and the award against them exceeded 200,000. Paternity leave An employee returned from paternity leave. He was advised that he was at risk of redundancy because the business had been sustaining losses for some time. His manager told him that the redundancy was 99% certain and that there were no suitable alternative roles. Shortly afterwards, a letter was handed to him confirming his redundancy. His appeal was heard by a director who subsequently admitted that he had never conducted a redundancy appeal and had received no training. After the hearing the same director was told of two suitable vacancies, but did not inform the claimant about them. The employment tribunal concluded that the real reason for dismissal was that he had taken parental leave and awarded maximum damages allowable of more than 65,000. Age discrimination A general manager had been in the role for six years and had worked at the company for over forty. A secret restructuring brought an end to his position. The claimant, 56, alleged that no information was shared with him about the restructuring or any alternative position. He applied for the vacant role of the operations manager. He was not given any notice of his interview and a more junior member of staff, aged 32, was appointed. The general manager s employment was terminated and an internal appeal was rejected. He sued, contending that there was no genuine redundancy and that the decision to dismiss was predetermined. He also alleged that the dismissal was procedurally unfair on the basis that there was no consideration of voluntary redundancy, reduction in hours, retraining or alternative positions and he contended that not giving him the operations director post was age discrimination. Settlement and defence costs came to more than 65,000. 9

10 Gross Misconduct The claimant was dismissed for gross misconduct following disciplinary hearings. The alleged misconduct included fabricating a claim for personal injury against the employer and alleging that he had not received manual handling training. He made a claim for unfair dismissal and then dropped it, but not before the employer incurred defence costs of more than 52,000. Pregnancy discrimination An operations manager informed her employer that she was pregnant. She claimed they then told her to resign. She refused, so she was dismissed, which she alleged was due to her pregnancy. The employer argued that it was due to her unsatisfactory approach to work and unauthorised absences during work hours. The case settled before the scheduled tribunal hearing with settlement and defence costs totalling over 75,000. Demotion Retailers decided to move the claimant from her position as manager of their flagship store to the position of manager at a smaller store. She said this was a demotion, was in breach of the implied term of trust and confidence and was designed to force her resignation. She further alleged that the profile of the store managers was younger than hers and that her face no longer fitted due to her age and careworn appearance. She contended that no reasons were given for the demotion, which led to a completely different job and loss of status, managerial responsibility and a fully-expensed company car. She resigned from her position and submitted that she was effectively dismissed because the demotion was in fact a completely different position. Settlement and defence costs exceeded 40,

11 BENEFIT PLAN LIABILITY This policy section insures pension schemes and other benefit plans, trustees thereof, corporate trustees, companies, directors, officers and employees for: wrongful acts, errors or omissions in respect of the operation of benefit plans; and representation costs in benefit plan-related investigations of them by regulators. FREQUENTLY ASKED QUESTIONS Who is insured under the Pension Scheme & Benefit Plan Liability (BPL) section? Essentially, non-usa benefit plans of a company (or group of companies), the company or group itself, corporate trustees in the group and insured persons. Insured persons are a range of natural persons, including plan trustees and directors and employees of the companies. What is covered? Loss resulting from covered claims against insureds alleging: wrongful act, error or omission misstatement neglect maladminstration breach of duty breach of trust in the performance of duties connected to the guardianship and administration of a benefit plan. Also: compensation up to a sublimit, payable to the policyholder, for time spent by staff in attending court as a witness or observer and time spent with lawyers for witness statements or for seeing a barrister legal representation costs in investigative inquiries by the Pensions Regulator, Pensions Ombudsman or other regulators into an insured s conduct related to a benefit plan contribution notice liabilities of an insured person arising from that person s wrongful act overpayments made by a plan as a result of a trustee s wrongful act for which the trustee is exonerated costs of replacing or restoring lost or damaged documents So, is this like a Pension Trustee Liability Policy? It is indeed full, state-of-the-art pension trustee liability insurance. But, it gives more than a typical pension trustee liability policy, which only covers claims against trustees. Chubb s Pension Scheme & Benefit Plan Liability section provides a comprehensive solution for the risks associated with the provision of other employee benefits: profit-sharing, employee share ownership, education, training, medical and unemployment. We cover scheme and plan trustees, plus the sponsoring company, corporate trustees and a range of additional insureds. How does the extended reporting period (ERP) work? If the policy period ends without Chubb agreeing to provide, or the policyholder agreeing to buy, a new BPL section, the insured persons or the policyholder may, provided the policyholder has not been taken over and that no other BPL cover is bought, obtain one year s ERP for a pre-fixed additional premium. This ERP will provide cover for that further year for claims arising from conduct prior to the policy period end. The time within which the insured persons or the policyholder must elect to obtain the ERP is 60 days from the end of the policy period. 11

12 What of new plans and new subsidiaries? New pension schemes and benefit plans might come into the overall set-up of the policyholder and its subsidiaries via the setting up of a new plan or the takeover of another company which brings plans with it. Subject to the BPL section s detail, such plans, taken-over companies, and their trustees, directors and employees automatically come into cover. One situation which prevents this is if the new plans have assets in excess of 25% of the assets of the original plans. In that situation, the policyholder must tell Chubb within 60 days of the event. Telling Chubb will then trigger cover, for the new plans etc for that 60 days. Cover after that will need Chubb s agreement. Can a trustee be liable for poor investment performance? Trustees must take all due care in appointing suitably qualified investment advisors and regularly monitoring their performance. Failure to do so can lead to personal liability. Can a trustee be the subject of a contribution notice? The Pensions Regulator can issue a contribution notice to the trustees and managers of a scheme as well as the employer, if it believes they were party to an act or deliberate failure to act which results in the underfunding of a scheme. What exposures do I face if benefits are misstated? Errors made by trustees regarding employees pension entitlements could result in the trustees being directed to compensate the affected employees. Compensation could include damages for emotional distress as well as loss of investment returns. Trustees should be aware that relying on the claimant to have realised the mistake is no defence. What happens if late communication is provided to beneficiaries? Trustees should be aware that the late or inadequate provision of information to a beneficiary, even where the trustees are assisting professional administrators, could constitute maladministration by the trustees. 12

13 PENSION SCHEME & BENEFIT PLAN LIABILITY CLAIM EXAMPLES Error in administration A scheme member left her employers, at which point she became a deferred member of their pension scheme. The scheme trustees advised her to transfer her value in the scheme to an additional voluntary contribution fund. They said that this would ensure that her annual pension at normal retirement age would be higher. But it transpired that she should have stayed in the scheme as a deferred member. Some years later, she noticed the shortfall in her benefits. The same advice had also been provided to other scheme members. The trustees incurred defence costs and settlement payments exceeding 150,000. Contribution claim - breach of duties The corporate trustee of a pension plan issued proceedings against actuaries, alleging failure to advise on the financial impact to the plan of granting early retirement. The actuaries asserted that advice was, in fact, provided to a director of the corporate trustee and that the corporate trustee should have passed it on to other trustees. This assertion formed the basis of a counterclaim by the actuaries against the corporate trustee, which then incurred costs more than 100,000 defending against the counterclaim. Alleged poor investment strategy After taking professional advice, the trustees moved investments in an attempt to enhance returns. They were also trying to reduce investment risk, but later, independent, legal advice concluded that the investments were high risk, insecure and unwise. Subsequent losses, along with exit costs incurred, led to suggestions of negligence on the trustees part. Lawyers were instructed to investigate and counter the suggestions. These legal defence costs exceeded 150,000. Failure to Enrol Trustees were sued by the heirs of an employee for an administrative oversight in failing to enrol the employee in the company pension scheme. Late Communication Professional administrators and assisting trustees were liable for the late and inadequate provision of information to an employee who, on redundancy, was entitled to have his pension transferred out of the scheme. The error and delay, compounded by stock market movements, constituted maladministration. The total loss was 40,

14 CORPORATE LEGAL LIABILITY This policy section insures companies: for defence costs and legal liability incurred on account of claims and prosecutions against them for a wide range of wrongful acts (including cyber wrongful acts involving use of the internet or a computer) and errors or omissions; for representation costs in investigations by the Health and Safety Executive or by the Information Commissioner; and for defence costs for Corporate Manslaughter and Corporate Homicide actions. FREQUENTLY ASKED QUESTIONS What is covered under the Corporate Legal Liability (CLL) section? Loss resulting from covered claims against insured organisations alleging: wrongful act, error or omission misstatement neglect breach of duty This also includes cyberloss from cyber wrongful acts involving use of the internet or a computer covered up to the full (CLL) section limit by a separate insuring clause. For some kinds of claim, the cover is for defence costs. Also: compensation up to a sublimit, payable to the policyholder, for time spent by staff in attending court as a witness or observer and time spent with lawyers for witness statements or for seeing a barrister legal representation costs in Health and Safety Executive investigations defence costs in prosecutions under the Corporate Manslaughter and Corporate Homicide Act 2007 defence costs in other health and safety prosecutions in the UK and Ireland legal representation fees in Information Commission investigations (subject to sublimit) defence costs in other data or information prosecutions in the UK (subject to sublimit) Who is an Insured? The insured organisations are the policyholder and its subsidiaries. What limit of cover does the CLL section provide? The financial limit of cover for the policy period (the main CLL section limit) is agreed between the policyholder and Chubb at the time the policy is taken out. There are certain types of claim to which a sublimit applies - a number of these claims are ones for which competing products give little or no cover at all. Can defence costs be incurred without Chubb s consent? Organisations must obtain Chubb s consent (which Chubb must not unreasonably withhold) before incurring such costs. However, if in an emergency the organisation cannot request Chubb s consent, the costs can be incurred without that consent for a period of 14 days following the date the claim or formal investigation is first made or instituted. 14

15 When does the policyholder have to report to Chubb that a new company has been created or acquired? Only if an acquired or created subsidiary: increases the total asset size of the policyholder s group by more than 25%, or has securities listed on any exchange in the USA will such acquisition or creation need to be reported. Reporting must take place as soon as practicable. Other acquisitions and creations do not have to be reported and the new companies automatically become insured. Are prior subsidiaries covered? Yes, should an organisation cease to be a subsidiary before or after the inception date of the policy, cover is provided to such subsidiary until the end of the policy period but only for wrongful acts that took place prior to the date that organisation ceased to be a subsidiary. Do decisions need to be cleared with Chubb as a pre-condition to cover? No. Unlike some policies, including many legal expenses covers, you only need to consult with Chubb in the event of a claim or a notifiable circumstance. Can Corporate Legal Liability be extended to cover Employment Practices Liability (EPL) claims? No. However, EPL cover can be purchased under another section of ForeFront Plus. Is there cover for the prosecution of an organisation under the Corporate Manslaughter and Corporate Homicide Act 2007? Yes, the CLL section provides cover for the defence costs. Is there cover for the prosecution of an individual under the Corporate Manslaughter and Corporate Homicide Act 2007? No. The simple fact is that individuals cannot be prosecuted under the Act. It is for the prosecution of organisations only. However, fatal accidents can lead to individuals being prosecuted for the ageold offence of manslaughter on the grounds of gross negligence, but cover for the defence costs of a director, officer or employee in such a prosecution are dealt with in the directors and officers liability section of ForeFront Plus, not the CLL section. What other cover is there for health and safety issues? There is sublimited: defence costs cover for prosecutions for breaches of the Health and Safety at Work etc. Act 1974 or of any other health and safety legislation of the United Kingdom or Ireland; legal representation fees in formal enquiries conducted by the United Kingdom s Health and Safety Executive or the equivalent authority in Northern Ireland or the Republic of Ireland. Is there cover for data protection issues? Yes, the CLL section provides investigation expenses for enquiries into the conduct of an organisation by a data or information authority. There is also cover for defence costs in prosecutions by a data or information authority against an organisation alleging a breach of any data protection, privacy or freedom of information legislation which a data authority is responsible for enforcing or promoting. Both scenarios are subject to sublimits. liability exposures faced 15

16 CORPORATE LEGAL LIABILITY CLAIM EXAMPLES Breach of agreement The policyholder received a letter alleging breach of contract. With regard to a possible merger, the claimant and policyholder had signed a confidentiality agreement. They later also entered into two exclusive distribution agreements. When the merger discussions broke down, the claimant alleged breach of contract and malicious falsehood. Defence costs of 50,000 were paid. Alleged breach of exclusive supply arrangement A transport company purchased a lorry from the policyholder. This was on the alleged understanding that the policyholder s name would remain on the lorry and that the policyholder would use the claimant for its transport needs. Subsequently, the claimant sued the policyholder for employing other haulage contractors. Defence costs and the settlement exceeded 30,000. Copyright and intellectual property breaches The claimant accused the policyholder of infringing its copyright and of passing-off with regard to the design and packaging of a protective case for use with a computer console. The complaint was directed solely against the policyholder and named no director or officer. The policy paid defence costs in excess of 30,000. Negligence in performance of contract The policyholder received a counterclaim alleging negligence in breach of contract arising from a debt recovery action. The defence costs sublimit of 50,000 was paid to fund the defence of the claim. Infringement of trade mark The policyholder was an authorised reseller of products manufactured by a third party supplier. Part of their agreement stipulated that all products were to be obtained from sources within the European Union. However, it was alleged that some products came from outside the European Union. The policyholder was also accused of trade mark infringements, by stocking, advertising and selling goods bearing signs identical to the registered trade marks of the supplier. The defence costs sublimit of 50,000 was paid out under the policy. 16

17 EMPLOYEE CRIME This policy section provides cover for organisations: against theft by employees or directors acting alone or in collusion with others; for losses caused by the following crimes by outsiders: computer fraud and funds transfer fraud; and for expenses associated with a covered crime. FREQUENTLY ASKED QUESTIONS How does the crime section of ForeFront Plus define crime? Crime is defined as: the criminal taking by an employee, acting alone or in collusion with others, of money, securities or property to the deprivation of an insured organisation; funds transfer fraud by a third party (i.e. someone other than the organisation or an employee), or computer fraud by a third party. Who is considered an employee under the section? The wide definition includes permanent, temporary, full-time, part-time and seasonal employees, volunteers, secondees and interns as well as members of the board of directors. What is the extent of the policy cover for expenses? The policy covers a range of expenses, including, but not limited to, reasonable expenses: to establish the existence and amount of any covered loss to repair or replace a safe or vault damaged as a result of a crime to reproduce or reconstitute data (whether soft/electronic or hard). What happens if a loss occurs because an employee fails to comply with internal controls? Good internal controls can help companies protect themselves. Chubb recognises that whilst a company will do its best to implement these controls, employees may learn to circumvent them. As a result, we do not impose a requirement to comply with a company s internal controls as a condition of cover. Nor do we impose punitive contractual terms which facilitate the declinature of claims in the event of a breach of such warranties or systems of check. What about a crime which may have occurred before the ForeFront Plus policy incepted but which has not yet been discovered? The crime section will cover a crime that occurs before the policy incepts provided that the crime is first discovered or suspected by a director, officer or insurance representative of the organisation during the policy period. Is there a requirement to prove that the crime was committed with the manifest or clear intent to defraud the company? No, unlike most crime policies, with ForeFront Plus there is no requirement to prove manifest intent or clear intent to defraud the company. Furthermore, there is no need to prove that the perpetrator personally gained. 17

18 Can cover extend beyond the policy period? If the policy period ends without Chubb agreeing to provide, or the policyholder agreeing to buy, a new crime section, the organisations will, provided that the policyholder has not been taken over or entered an insolvency procedure and that no other employee crime cover is bought, automatically have an extended discovery period of 90 days for no additional premium. This will provide cover for those 90 days for crimes which occurred before expiry of the policy period but not first discovered until those 90 days. However, this extended protection will not be available to an organisation which has entered an insolvency procedure. What happens if someone steals from a company pension scheme or benefit plan? Pension schemes and employee benefit plans are included as insureds under the crime section. Lost money means lost earnings on that money. How does the section help? The covered expenses include interest on stolen money for the period between when the crime occurred and when it was first discovered. Is cover limited to the UK and Ireland? No, as the largest provider of this kind of insurance in the world, we recognise that a significant risk exists from locations outside of the UK and Ireland. The crime section covers crimes committed anywhere. 18

19 EMPLOYEE CRIME CLAIM EXAMPLES Vanishing stock The wholesale outlet of a sound equipment company was surprised, when calling for particular items from the company warehouse, to learn that there were no such items, even though records showed that there should have been. A senior buyer at the company had been running a scam with an outside conspirator, involving fictitious orders, followed by fictitious rejections and manipulation of the invoicing system. The losses totalled in excess of 750,000. Ledger fraud The financial controller of a company which operated visitor attractions made BACS payments to his own bank account over the course of six years. Once the BACS payments had been authorised they were deleted from the computer system. The amounts would then be moved around various ledger codes in decreasing amounts to hide the transaction. The amount stolen amounted to more than 1,300,000. European subsidiary A machine parts manufacturer had a French subsidiary. The group s bank noticed suspicious payments to the private accounts of the subsidiary s accountant. This led to him admitting to the police that, over a four year period, he had misappropriated money by many small transfers against false supplier invoices. The amounts taken exceeded 200,000. New stock system reveals missing cash A metal producer s implementation of a new stock system led to the discovery of a significant stock shortfall. External forensic accountants carried out a detailed investigation. This confirmed suspicions about a particular employee and also revealed his wife s involvement in the crime. Over a three year period, they stole by inventing fictitious purchases from former suppliers, using forged signatures. The loss was more than 600,000. fraud An employee created a fake notice to his employers from a supplier, asking for future payments to be made to a new bank account. The notice contained the unique supplier number, supplier logo and had all the relevant addresses for both the employers and the supplier. The employers paid two invoices amounting to more than 85,000 to the new account. A week later the supplier chased for payment and the fraud was uncovered. 19

20 KIDNAP AND EXTORTION EXPENSES This policy section provides proections for organisations and employees (and their relatives) against expenses incurred in connection with a kidnapping, hijacking, wrongful detention, extortion, cyber extortion or political threat. FREQUENTLY ASKED QUESTIONS Which natural persons are protected? As well as employees and their relatives: a visitor at the home of an employee* a person at an employee s home and employed in the household* a guest or customer on an organisation s premises* an organisation s guest or customer travelling in an aircraft, watercraft or motor vehicle with an employee a person temporarily retained to deliver a ransom payment (* in each case provided that the person is kidnapped from that home or premises) These natural persons are referred to as insured persons. When is the cover operative? 24 hours a day, 365 days a year. What is cyber extortion? This is where a threat is made to damage or render data unusable, to disclose customer information for which the insured is legally liable, or to disseminate, divulge or utilise customer information by unauthorised input into a computer system. If an employee is kidnapped, how does the organisation fill in for that person s work? The K&E expenses section will pay for up to 60 months or, if earlier, until expiry of 30 days after release or death of the employee. If a threat to contaminate products is made, what does the section do? It covers reasonable expenses incurred in the withdrawal, physical inspection or destruction of products manufactured or distributed by an organisation which are the subject of such threat. What happens if an organisation buys or creates another company? The acquired or created company is automatically covered. But, if its assets increase the total assets or turnover of all the organisations together by more than 10%, the policyholder must tell Chubb of the acquisition or creation and Chubb will be allowed to assess the additional risk. What is Political Threat? Political threat is a politically motivated threat made directly against an organisation to do bodily harm to an employee or a relative. What kind of extortion is covered by the policy? Extortion is a threat against an organisation to: commit a kidnapping of, do bodily harm to, or wrongfully abduct or detain, an insured person; damage or destroy any tangible property owned or leased by an organisation (or for which an organisation is legally liable or has located on its premises); contaminate any product manufactured or distributed by an organisation; make known that a product manufactured or distributed by an organisation has been contaminated or is the subject of a threat to contaminate it; disseminate, divulge or use proprietary information perpetrated to obtain a pay-off. 20

21 KIDNAP AND EXTORTION EXPENSES CLAIM EXAMPLES Extortion threats from an anonymous source A hotel group s managing director received an anonymous letter threatening to blow up several hotels unless 1,000,000 was paid. The letter appeared to be from a radical political group. Risk consultants analysed the letter and advised that it should be taken seriously. Security measures were increased. Another threat was made four months later, but no more after that. No extortion payment was ever made, but expenses came to 50,000. Bitter employee Fired for poor performance, an employee with a history of violent behaviour demanded money and threatened bodily injury to his former employers if payment was not made. This verbal threat was followed by a series of letters and the company s chairman was stalked. Security consultants were quickly called in to provide security for the chairman and deal with the extortionist. After several weeks, a meeting was arranged between the former employee and the police. The man was informed of the seriousness of his threats and their legal ramifications. As a result, he agreed to his legitimate termination pay and stopped his threatening activities. Expenses incurred amounted to more than 40,000. NEGOTIATORS AND CONSULTANTS You won t be alone in a crisis situation when you are covered by the Forefront Plus K&E expenses section. If a covered event occurs, you will, if you wish, have instant access to the services of The Ackerman Group an international security firm widely recognised for its unique experience and expertise in handling these types of situation. The Ackerman Group will respond to the emergency immediately, providing specialist advice and recommendations, while taking direction from you. The ultimate objective is the safe and speedy release of hostages or protection of corporate assets in the event of an extortion threat. Unlike many of its competitors, The Ackerman Group is prepared to handle all aspects of a hostage recovery, including negotiations, liaison with law enforcement agencies, briefing hostage families, conversion and protection of ransom funds, and even delivery of the ransom itself. The organisation has the expert knowledge and resources needed to handle a tense emergency situation. Clients can also, at their own cost (not covered by the policy), contact The Ackerman Group for consultation on security procedures and crisis management prior to an extortion threat. It is not a requirement of the K&E section that you must use The Ackerman Group. 21

22 WHY CHOOSE CHUBB? Chubb is different from other insurance companies. For us, insurance is about creating certainty rather than doubt. Instilling confidence and peace of mind, not fear. We do this by getting to know the people with whom we do business. We listen closely so that we can respond with the insurance solution or advice most appropriate for you. How? Because rather than aim to be all things to all people, we specialise in insuring the kinds of situations and industries we know really well. Our people take pride in their respective areas and are on hand to give expert advice. Market Leading Service Chubb is well known for a customer-first approach to service around the world, which sets Chubb apart from some other companies whose business is built on volume rather than service excellence. We maintain a reputation for fairness and integrity by treating every customer - from policy issuance to claim settlement - as we would want to be treated. It is easy to do business with us through our global network of offices staffed by Chubb underwriters, risk engineers and claims specialists. Our claims service is 24/7. Strong Financials Since 1882 we have maintained outstanding financial strength. Our policy is to underwrite conservatively and invest prudently. Chubb Insurance Company of Europe A++ (Superior) A.M. Best P&C Financial Strength Chubb Corporation A++ A.M. Best P&C Financial Strength aa- A.M. Best Corporate Senior Debt Aa2 Moody s P&C Financial Strength A2 Moody s Corporate Senior Debt AA Standard & Poor s P&C Financial Strength A+ Standard & Poor s Corporate Senior Debt CONTACT US UK (UK Headquarters) Chubb Insurance Company of Europe SE 106 Fenchurch Street London EC3M 5NB T: Chubb Insurance Company of Europe SE 19 Blythswood Square Glasgow G2 4BG T: Chubb Insurance Company of Europe SE Arthur House, 41 Arthur Street Belfast BT1 4GB Northern Ireland T: Chubb Insurance Company of Europe SE West One, Wellington Street Leeds LS1 1BA T: Chubb Insurance Company of Europe SE 6th floor, Colmore Row Birmingham B3 2BB T: Chubb Insurance Company of Europe SE 3rd floor, Abbey House 32 Booth Street Manchester M2 4AB T: Ireland Chubb Insurance Company of Europe SE 6-10 Suffolk Street Dublin 2 T: Cover is underwritten by Chubb Insurance Company of Europe SE. This information is descriptive only. The precise cover provided is subject to the terms and conditions of the policy issued. For promotional purposes, Chubb means member insurers of the Chubb Group of Insurance Companies. Chubb Insurance Company of Europe SE is a European company registered in England and Wales whose registered office address is 106 Fenchurch Street, London EC3M 5NB. Chubb is authorised and regulated by the Financial Services Authority. FB113 04/13 For the purposes of training and monitoring our service, some telephone calls may be recorded.