Directors' and Officers' Liability Insurance in the Construction Industry
Construction work involves unique risks. Whether erecting scaffolding, constructing a pipeline or framing a home, construction work brings with it potential risks – not only for those on the jobsite but also the managers, directors and administrators of the construction company. For this reason, it is important to ensure that your business has adequate coverage to protect its officers, directors and administrators in the event of workplace accidents or unintended consequences from construction activities.
We have seen in our own community examples of cranes falling, barges tipping, and excavations collapsing. Such risks are inherent in the construction industry and remind us why good directors’ and officers’ liability insurance – insurance that offers a full range of coverage with minimal exclusions – is important.
Increasingly, directors’ and officers’ liability insurance has become available to small- and medium-sized enterprises but it is unclear why so few organizations buy management protection or employee practices liability insurance. Trends in the United States indicate that approximately 37% of US companies do not purchase any type of management liability insurance. In another survey of private companies, the majority of survey participates – 63% – did not buy directors’ and officer’ liability or employment practices liability insurance. It is likely that the trend in Canada is similar1. What should you do?
If your organization currently has directors’ and officers’ liability insurance, re-visit it annually to ensure that coverage gaps are continuously narrowed and protection is consistently increased. If you do not currently have insurance for your enterprise that covers directors and officers as well as employee activities, talk to your broker and arrange coverage. Examples from across Canada indicate that liability risks are significant. The infamous Red Cross tainted blood scandal, the insolvency of Nortel, and the recent extension of Criminal Code liability in relation to workplace accidents all mean that directors’ and officers’ liability insurance is now more important than ever.2
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1John A. Barclay, “No Small Potatoes: Small and Medium-Sized, Privately Owned Companies In Canada Face Several Of The Same Management Exposures As Larger Corporations, And Yet Many Don’t Purchase Directors And Officers (D&O) Insurance. Why Not? (January 2010), online: Canadian Underwriter http://www.canadianunderwriter.ca/news/no-small-potatoes/1000356686/.
2With credit, acknowledgment and thanks to the work of: D. Geoffrey Machum, Q.C., and Tipper McEwan, Directors’ and Officers’ Liability Insurance: A Tool for Managing Personal and Corporate Risk IN Construction Activities, Journal of the Canadian College of Construction Lawyers (2014) 1 J.C.C.C.L. 1.