1. Claim: Unfair Competition
Insured: Pty Ltd internet pharmaceutical company, employing 20 people and an annual revenue of $2 million.
Scenario: The Managing Director left his former company and started a new internet based pharmaceutical company. He was subsequently sued by the directors of his former company. The directors of his former company alleged breaches of intellectual property rights and plagiarism in relation to the products which the Managing Director was marketing on the internet. It was claimed that these products were a rip off the former company’s own product which were sold in chemists across Australia. The former company issued proceedings in the Federal Court seeking damages in excess of $20 million.
Outcome: The claim was settled at mediation with defendant director agreeing to pay the amount of $1.3 million in damages. The legal costs incurred in this claim were in excess of $200,000.
2. Claim: Misappropriation of Trade Secrets
Insured: Pty Ltd company with 45 employees and an annual revenue of $3 million.
Scenario: Company X sued directors and officers and the Company of competing Company Y after five employees of Company X left to join Company Y. Company X sued Company Y for $700,000 alleging theft of trade secrets and claiming that the five employees were still in the employment of Company X when they began sharing proprietary information with Company Y.
Outcome: The claim proceeding to hearing and was settled after the second day of hearing for the amount of $305,000. Although the claim was settled on a commercial basis, unfortunately significant costs were incurred preparing this matter for hearing. The legal costs and expert witness costs totaled over $380,000.
3. Claim: Theft of Trade Secrets
Insured: Pty Ltd company with 30 employees and an annual revenue of $3 million.
Scenario: The Chief Executive Officer of Company A left to become Chief Executive Officer of a rival Company B. Three years later, the Managing Director of Company A sued the Chief Executive and his Company B for stealing trade secrets and confidential business information.
Outcome: The claim was vigorously defended. Although the claim eventually settled on the basis that each party walks away and bears own costs, the legal costs incurred by Company B in defending the claim were $110,000.
4. Claim: Breach of Duty of Care
Insured: Pty Ltd company with 25 employees and an annual revenue of $2 million.
Scenario: Company A specialized in liquidating troubled assets, such as inventory and fixed assets. It sold products to Company B. A third company (Company C) alleged Company A had already accepted an offer from them to purchase products for $1.45 million and they sued when Company A sold equipment to Company B. The plaintiff claimed the value was $10 million.
Outcome: Company A paid $600,000 to Company C, and $32,000 in defence costs.
5. Claim: Shareholder Dispute
Insured: Pty Ltd Transport Company with 40 employees and an annual revenue of $4 million.
Scenario: The directors of the Transport Company A as well as the Company were both minority shareholders in a rival Transport Company B which they were seeking to purchase the assets and business. Upon completion of the sale, the director of the Transport Company A and the Company sought damages alleging that the rival Transport Company B and its directors and officers had made misrepresentations in connection with the purchase and sale of the Company.
Outcome: The director of Transport Company A and Company A sought $320,000 in damages and subsequently agreed to a settlement of $280,000. Company B incurred $170,000 in defence costs.
6. Claim: Shareholder Dispute
Insured: Pty Ltd company with 220 employees and an annual revenue of $20 million.
Scenario: A class action was threatened by shareholders who alleged damages of over $5 million when they lost their investment in stocks hey purchased in the Insured Company. The shareholders threatened to sue the directors and officers of the company as well as the Company for allegedly making untrue statements of fact and omitting material facts in connection with the stock sale.
Outcome: The Company negotiated an out of court settlement with the shareholders for the amount of $600,000. The total legal costs incurred were $85,000.
7. Claim: Employment Practices Liability – Wrongful Termination
Insured: Pty Ltd company with 80 employees and an annual revenue of $8.5 million.
Scenario: A senior manager was terminated for allegedly stealing a laptop computer. The terminated employee maintained that he was provided with permission to take the laptop home to work on a report. Passing derogatory comments were made by the owner of the company that the senior manager was too old and should be ‘put to pasture’. As the comments were made to the terminated manager and in front of two other employees, the terminated employee sued his employer for wrongful termination based on age discrimination. The employee further alleged he could only be terminated for good cause and maintained a history of superseding his sale targets. The terminated employee sought damages of $800,000.
Outcome: The employer settled with the dismissed employee at a Court ordered conciliation for the amount of $550,000. The employer also paid $150,000 in defence costs.
8. Claim: Employment Practices Liability – Sexual Harassment
Insured: Pty Ltd company with 90 employees and an annual revenue of $25 million.
Scenario: A former employee who was retrenched as part of a company wide reduction in work force commenced proceedings against the company and two managers alleging sexual harassment, intentional infliction of emotional distress, wrongful termination, retaliation, and sex discrimination. The employee had made allegations against the Managing Director that he had inappropriately touched her and that he regularly made abusive and sexually explicit comments towards her. The employee further alleged that as a result, she has suffered depression and now unable to re enter the workforce due to her mental distress. Her employer defended the claim by alleging that her employment record showed poor performance, conflict with management and claimed that the termination was part of a general reduction in workforce. The employee vigorously defended these allegations.
Outcome: Company was ordered to pay the former employee $60,000 plus her legal fees. In addition the company paid $30,000 in defence costs.
9. Claim: Employment Practices Liability - Harassment and Bullying
Insured: Insured is a Pty Ltd company with 20 employees and annual revenue of $20 million.
Scenario: Claims by two former officers of the company against certain directors and officers for bullying, harassment, abuse and sexual harassment against a former employee. Claims against the entity that it failed to respond to those allegations. Employees claim combined compensation of $500,000.
Outcome: Matter settled for payment by company of $200,000 per Claimant. In addition, the company paid $120,000 in defence costs.
10. Claim: Employment Practices - Sexual Harassment
Insured: Sports Club.
Scenario: Ms X has been employed by the Club for a number of years. She alleges that her
supervisor sexually harassed her over the duration of her employment by touching her inappropriately and making inappropriate comments. She only reported the alleged sexual harassment to the Club when she believed one of the incidents had been caught on tape. She refused to return to work after reporting the incident to the Club on the grounds that she is suffering major depression as a result of the alleged sexual harassment. She made a workers’ compensation claim due to her alleged inability to return to work. She also lodged a complaint against both the Club and her supervisor with the Australian Human Rights Commission seeking approximately $160,000 in compensation plus future legal costs.
Outcome: Matter settled for $75,000. In addition, the Club paid $30,000 in legal fees.
11. Claim: Employment Practices - Unfair Dismissal and Sexual Harassment
Insured: Small manufacturing company of 20 employees. Turnover of $10 million.
Scenario: Male former employee lodged claim with Fair Work Australia, claiming he was terminated because of his gender. His manager was a woman and most of his work colleagues were women. He alleges that his manager showed him inappropriate photos of herself and her husband and emailed these to him. He also alleged that she made advances of a sexual nature, which he says he rejected. He alleged that after that rejection she raised various performance issues which led to his employment being terminated. He seeks 6 months’ salary by way of compensation, being $60,000.
Outcome: Matter settled at Conciliation with the employer agreeing to pay $20,000. Legal defence costs incurred in this claim totaled $16,000.
12. Claim: Occupational Health & Safety
Insured: Pty Ltd Construction Company with 20 employees and annual revenue of $6.3 million.
Scenario: During the construction of a commercial property, an employee was severely injured and left paraplegic when a pile of debris accidentally fell on him. The company was subject to a full Occupational Health and Safety investigation and prosecution.
Outcome: The Company vigorously denied and successfully defended all allegations. Despite their attempt, the Company was fined $150,000 and incurred $100,000 in legal costs.
13. Claim: Occupational Health & Safety
Insured: Pty Ltd company with 150 employees and annual revenue of $10 million.
Scenario: Leading up to the Christmas period, the company employed 25 part time casual employees in order to pack and ship out the company’s product within time for the Christmas rush. The casual employees received a speedy 2 day safety and instruction course in relation to the safe use and handling of the equipment. Unfortunately, there were two separate instances of injury to employees. One employee caught his hand in the machine and lost his thumb and forefinger and another employee received severe lacerations and burns to his left arm. A full Occupational Health and Safety investigation began which eventually led to the company being prosecuted.
Outcome: Following a 10 day hearing, the company was found liable and was fined $250,000. Overall defence costs of $100,000 were incurred over the duration of the investigation and prosecution.
14. Claim: EPA Prosecution
Insured: A Pty Ltd transport company with 20 employees and annual revenue of $5 million.
Scenario: The director and company were charged with three offences under the Environment Protection Act. These are indictable offences and each charge carries a potential maximum fine of $280,000. It was alleged that the driver, employed by the company, drove a petrol tanker (owned by the company) to a petrol station. When manoeuvring the tanker to the unloading tanks, the driver collided with a fuel pipe, causing over 3000 litres of petrol to escape from the tanker and on to the grounds of the petrol station.
Outcome: Following a 3 day hearing, the director and company were found liable and were fined $120,000. Overall defence costs of $60,000 were incurred over the duration of the investigation and prosecution.
15. Claim: EPA Prosecution
Insured: A Pty Ltd manufacturing company with 120 employees and annual revenue of $25 million.
Scenario: The director and company were charged with six offences under the Environment Protection Act. It was alleged that the carbon emissions from the factory were incredibly high over a period of three days. This was a direct result of a mechanical breakdown in the factory which took three days to repair.
Outcome: Following a 1 day hearing, the director and company were found liable and were fined $30,000. Overall defence costs of $15,000 were incurred over the duration of the investigation and prosecution
16. Claim: Trustee Liability
Insured: Pty Ltd accounting company with four directors and 45 employees.
Scenario: One director fraudulently misappropriates money earmarked for employees’ superannuation contributions. Upon discovery, employees claim against director (including innocent directors) and also the Company. The claims involve not only loss of the superannuation contributions but loss of opportunity and profits the employees would otherwise have made with the benefit of those monies.
Outcome: Director found liable for $230,000. In addition the company paid $90,000 in defence costs.
Sign up to our eNewsletter