Safeway bosses sued for insurance

Chris Wheal

Feb 2nd 2010

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Supermarket Safeway has taken High Court action against former chairman, David Webster and 10 other staff to recoup a price-fixing fine of up to £16.4m, the FT reports.

Basically this is the new owner Morrisons suing Safeway's own director's & officers' (D&O) insurance. It feels like a bit of a scam, but so often the only way to make a claim is to sue.

Companies take out D&O polices so that if their boards are negligent though errors and omissions and shareholders feel they have lost out as a result and sue, the insurer picks up the defence costs and damages.

Shareholder rights

Fair enough: Morrison is and was a shareholder and a fine running to millions that might otherwise have been available to shareholders does mean it is out of pocket.

If Safeway is fined for price fixing and the price fixing happened under the watch of one set of directors then, even if they had nothing to do with it, but simply did not spot it as happening, that omission is negligence.

But suing to claim off your own insurance you took out to protect you from being sued by others seems strange.

Suing the only solution

In fact it isn't. If a family is involved in a car crash, the passengers may have to sue the driver to get damages, even if the driver is dad.

The FT suggests that if Morrisons is successful, other firms may sue their employees for negligence. In reality, most staff won't be covered by such insurance and would have such small assets that they would not be worth suing without it. Having insurance would make them a target.

Insurance can sometimes seem a madcap world where only the lawyers win.