FEATURE
DIRECTORS AND OFFICERS INSURANCE – CONTINUED FOCUS ON RISK By Andrew Horne, partner, and Nick Frith, senior associate, Minter Ellison Rudd Watts
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ompany directors are facing increasing challenges. Substantial damages awards in the Mainzeal case, together with a greater presence of litigation funders and an increasing likelihood of class actions are increasing directors’ and their insurers’ risks. In this article, we discuss our views of four key legal risks facing directors and their insurers in the near future, being: 1. Climate change 2. Securities class action 3. Regulatory 4. Disclosure to insurers CLIMATE CHANGE RISK Climate change should be top of mind as giving rise to potential legal action against directors. The Intergovernmental Panel on Climate Change’s recent Special Report on the impacts of global warming of 1.5°C above pre-industrial
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December 2019
levels has created a large amount of interest in the impact of climate change from a number of angles. While the focus has largely been on companies and consumer behaviour, there are some clear indicators that directors may be in the firing line of potential plaintiffs in claims for breach of duty arising from the climate impact of the companies they lead. In a recent extra-judicial article, three judges of the New Zealand Supreme Court wrote on Climate Change and the Law and specifically addressed corporate governance and litigation beginning with: Directors have a duty to consider the ‘best interests’ of the company in all of the colloquium jurisdictions. It remains to be seen how climate change impacts that duty.There have already been cases in Australia and the United Kingdom relying on corporate governance and company law to hold companies to account for their climate impacts and actions. While acknowledging that New Zealand legislation does not have an
