Franchise Failure

Claims Examples Paid by Directors and Officers Liability Insurance

Franchise Failure

The insured company entered into franchise agreements to sell their products. A small number of franchises performed poorly and risked potential damage to the brand and reputation. Following legal advice, termination letters were issued to three franchise holders for breach of contract. Two of the franchisees made allegations of fraudulent misrepresentation against the company and against a director. The basis of the allegations were that the individuals to whom the franchise agreements had been granted were misinformed as to the potential for business growth and development and that they suffered a loss as a consequence. Defence costs were in excess of £100,000 on a 100% allocation basis.