Insurance Journal Forums

We have a client insured with The Hartford for GL and E&O. They do software sales and consulting. They are very concerned that their Ex employer might sue them for going after their clients eventhough their non compete has been over with for 3+ years. Will a D&O cover them? I cant get a straight answer from any of the UW. Should I pursue D&O or will the Gl cover this? Any help is appreciated.

Jam,

The reason you can get a straight answer is because whether a claim would be covered by a D&O policy depends on what is "alledged". Keep in mind that D&O is "decision makers E&O". So if they make a corporate decision to go after a group of clients they "might" have coverage if sued for illegal trade practices.

There are a lot of other reasons to carry D&O so ti would be wise for them to seriously consider the coverage.

You may want to send their attorney a specimen copy of a D&O policy and let a legal professional make the determination and then potentially recommend coverage.

Ken Kukral
kennethkukral@intlxs.com
www.intlxs.com

Your client should also be discussing this with their legal counsel. If hey had a non-compete (which in most states wouldn't hold up in court) that expired over three years ago, then their former employer would have no legal grounds to stand on (unless they took "trade secrets").

Another consideration: if the client has already contacted customers of their former employer, purchasing a policy today for acts committed in the past will probably not be covered; the D&O policy would probably only cover acts from its inception date regardless of Claims Made or Occurrence form.Sounds cumbersome, but why not have them form a new company, put the GL, E&O, and D&O in place immediately so that any contact from the new entity would have coverage. You can't cover the past but you can protect yourself going forward, and by forming a new, third company, gives another layer of insulation from suit.
The chain: subject employees leave company A, form company B, (rightly or wrongly)contact customers of company A with no D&O in place and a non-compete clause to contend with, so then close company B substituting company C with all coverages in place.