Compliance Legal Protection insurance

Insurance to finance internal investigations

Compliance legal protection insurance is a financial risk management product that helps companies cover the cost risk of internal investigations. 

The insurance steps in if the company management decides to initiate an internal investigation due to reasonable suspicion of a violation of the law. It is not assumed that the public prosecutor's office, antitrust authorities or other supervisory authorities are already investigating. 

What does compliance legal protection insurance cover?

If there are justified suspicions of a breach of compliance during the insured period in the areas of competition, IT or corruption, the insurer will bear the costs associated with the internal investigation. These are typically legal fees, but also costs for tax consultants, auditors and IT forensic experts. 

In principle, the insured entity is free to choose their advisor. If the client chooses lawyers from the insurer's compliance panel or the hendricks network of lawyers, this has the advantage of certainty that the fees are appropriate, as they have been pre-agreed.

The insurance cover applies to companies based in Germany and can be extended to the European economic area for "cross-border investigations" (with a sublimit set as a percentage of the total policy limit).

If there is a disagreement between the insured and the insurance company about the determination of the insured event, the insured is entitled to call in an expert at the expense of the insurer. This professional is a member of the joint insurer-broker compliance panel or the hendricks network of lawyers. The expert's decision is binding for both parties.

Why do companies need compliance investigation insurance?

Spectacular cases of liability, such as the establishment of slush funds at Siemens years ago or, more recently, the diesel affair at VW, have shown that where there is criminal misconduct in the company, it results in extensive internal investigations in addition to official investigations - with very considerable costs.

Even in the case of less serious rule violations, management and supervisory bodies are required to investigate them. 

You should be able to rely on a compliance management system that also contains a module for conducting internal investigations. If they neglect their duty of compliance and do not follow up on indications of misconduct in the company, they face criminal and civil liability. 

Documented compliance measures have a mitigating effect on sentencing. 

Or the other way round: if there is a conviction, companies that have neglected compliance must expect a much higher fine. Failure to conduct internal investigations also has a negative impact on the company's balance sheet and, in the worst case, can threaten its existence.