Directors’ and Officers’ Liability Insurance

The range of protection provided by a Directors’ and Officers’ (D&O) policy can vary greatly from one provider to another. Claims generally arise from the following scenarios: 

• Breach of duty resulting in financial losses, damages or bankruptcy
• Misrepresentation of company assets
• Misuse of company finances
• Fraud whilst undertaken work on behalf of the company
• Failure to comply with regulations and laws relevant to the sector in question
• Theft of intellectual property and of competitor’s customers, through illegitimate means
• Lack of corporate governance and leadership resulting in company hardship

For public companies, the most likely claimant would be a shareholder or investor in the business. For companies of all types there is a risk of a claim from an employee as a result of your actions, this could include negligence in terms of health and safety or discrimination.

While D&O policies have existed for a long time, there can be no doubt that the requirement for this type of protection has never been more important. There are numerous reasons for this, including:

• Employees knowing their employment rights and being more likely to be offered support from HR or unions when raising a claim; 
• To better protect companies, the onus of these types of claims has shifted more towards the personal responsibility of individuals rather than the company as a whole;
• Changing regulations, particularly in the case of UK businesses following Brexit, and regulatory bodies more actively investigating companies.

While the risks of a claim are more common for those working in public companies, this does not remove the necessity of a policy for businesses of other types. If your business operates with a board of directors or advisory committee then a D&O policy should be considered vital.

Often not for profit organisations are left unprotected from legal action if a claim is undertaken against the board, especially within smaller organisations where there is less awareness of the need for Directors & Officers Insurance.

A Directors and Officers policy is a very specific type of cover, designed to protect against a specific type of risk. Cover is not provided for claims against your company, for example for illegal practices that stem throughout the business or negligence at lower levels.

D&O liability insurance provides cover for wrongful acts allegedly undertaken while acting as a director or officer for the company.

It’s a common misconception that personal liability claims would be covered under a Professional Indemnity (PI) policy. But this is unlikely to be the case. Having specific Directors’ and Officers’ Liability Insurance is the only way to guarantee personal protection for those with management responsibility in your business.

If you’re running a company there are a variety of policies that it’s necessary to undertake, in addition to your Directors and Officers insurance policy you may wish to consider:

Professional Indemnity – protection for service errors, contract performance disputes or any other professional liability issues. These policies can include legal defence costs, damages and compensation due to professional negligence, which can be substantial.

Public Liability –  cover designed to protect your business in the event of a claim for an injury or damage to property by anyone visiting your premises.

Employers Liability – required by law for most businesses, Employer’s Liability provides financial protection to cover compensation awards for injury or damage suffered by an employee, volunteer or freelance worker.

Office and Property Insurance – can include cover for both the physical premises and the contents within as well as public and employers liability and business interruption.

Business Interruption Insurance – designed to enable you to continue to pay the bills and retain customers should something happen that results in a loss of income.