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April 2020

Directors' and Officers' Liability in the Age of COVID-19

As we enter into our fifth week after the declaration of an emergency by the Province of Ontario1 due to COVID-19, we are all adjusting to our “new normal” of social distancing, debating whether or not to wear a face mask and trying to locate the ever-elusive hand sanitizer. As of April 19, 2020, there were 2,374,141 confirmed cases of COVID-19 with 163,372 deaths globally.2 Canada had 34,549 confirmed cases with 1,522 deaths. As we navigate through closed businesses, disruptions to global supply chains and potential food shortages,3 the question will arise as to whether we were adequately prepared for dealing with this pandemic.

The World Health Organization declared COVID-19 as a Public Health Emergency of International Concern on January 30, 2020. Within six weeks of this declaration, Ontario and much of Canada closed non-essential businesses. It has become apparent that businesses will need to innovate in order to operate in this new normal of social/physical distancing. Many businesses are not prepared on how to appropriately navigate through the new requirements and keep both employees and clients safe. The question arises of whether the directors and officers of a corporation will have any liability for failing to adequately plan for the re-opening of business during this current pandemic wave and any subsequent waves.

...will Directors and Officers have a duty to have a pandemic plan in place to include items such as...

A Directors' and Officers' Liability Policy normally provides coverage for a Wrongful Act committed by a director or officer. A wrongful act is often defined to include any actual or alleged acts, errors or omissions.

Now that we have experienced a global pandemic and the concomitant social restrictions, will Directors and Officers have a duty to have a pandemic plan in place which will likely include items such as a disinfection policy, remote work policy and an employee policy to allow for social distancing where remote work is not an option? Would these duties extend as far as stockpiling certain safety supplies and arranging for transportation for certain employees where public transit may no longer be safe or feasible? Will new duties be imposed upon directors and officers by the courts for failing to appropriately plan for this current pandemic and any future epidemics or pandemics which may arise. If such duties are imposed by the courts, will current insurance policies respond? Will the underwriting of such policies change such that corporations will be required to have a pandemic plan in place to obtain directors' and officers' coverage?

As we are in unchartered territory, the answers to many of these questions are currently unknown.

We do advise, however, it would be prudent for a corporation to put a re-opening plan in place, as well, to plan and prepare for any future waves of the current pandemic and any future pandemics to instill both employee and consumer confidence.

We are here to assist you with your planning and to answer any questions that you may have regarding director and officer liability at this time. We will get through this together. Be kind, be responsible and be safe. Andrà tutto bene.

Read up on all MB COVID-19 news and articles.

  1. The emergency was declared on March 17 2020.
  2. COVID-19 Dashboard by the Center for Systems Science and Engineering (CSSE) at John's Hopkins
  3. Food security experts warn of supply shortages, higher prices due to global pandemic.

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