Florida attorney general is investigating Norwegian Cruise Line, who has its corporate headquarters in Miami, for allegedly misleading customers over COVID-19 dangers. Attorney General Ashley Moody’s office invested allegations that Norwegian Cruise Line gave “misleading and potentially dangerous sales pitches” to customers downplaying the risk of Coronavirus.
According to the attorney general’s office, a whistleblower leaked emails to the media that show managers at NCL encouraged employees to downplay the risks associated with contracting COVID-19, using one-liners such as, “the coronavirus can only survive in cold temperatures, so the Caribbean is a fantastic choice for your next cruise,” and “the only thing you need to worry about for your cruise is do you have enough sunscreen.” (Miami New Times)
Following the investigation is a shareholder action against Norwegian Cruise Line Holdings Ltd alleging the company covered up the extent of the outbreak to protect bookings. Having disgruntled investors alone does not warrant an action but failure to disclose & identify risk and not taking adequate measures may be.
So how Directors’ & Officers’ Liability apply in case the managers are being sued, how would a D&O policy respond? First have these managers committed a wrongful act. A wrongful act is an action or decision that considered to be wrongful by another party. Even if the offending executives feel that their behaviour is reasonable at the time, if the affected party feels otherwise, a claim may be brought against them.
At the time of writing this article there’s only allegations made for wrongful behaviour and D&O covers these situations where true positions are not clear yet and protects the management when faced with actions and related to that defence costs, legal representation or investigation costs.
Were the managers defending the interest of their company and the employment/livelihood of their colleagues or were they misleading their customers exposing them to unnecessary risk? As always, the truth probably lies in the middle and it’s up to the courts and institutions to decide who is liable here. While it’s not in the managers or the company’s control what the verdict is, they one thing they had control over is their decision to take out a Director & Officers policy (or not).
