Directors & Officers
Your business probably has insurance cover in place for a wide range of eventualities, however it is likely that this does not include Directors and Officers liability insurance (D&O)
As our claims examples highlight, if you are a Director or Officer, both the business and you personally, are currently at risk.
You are at risk personally
To protect your company and your livelihood you should put this important insurance in place now.
It will provide you with protection and peace-of-mind against personal financial loss associated with claims of negligence or breach of responsibilities.
This is vital as legal actions can be brought from a wide range of parties including shareholders, creditors, employees, contractors, regulatory authorities and the company itself.
SME’S at risk of legal action
Even if you work for a small or medium sized business you still need D&O cover.
In fact, it is often considered easier to instigate legal action against smaller businesses, as larger organisations often have more people involved in decisionmaking, making legal action more complicated.
Despite this, research suggests that only around 20% of SME’s consider D&O cover.
The two main reasons for this are:
- Misunderstanding
- The belief that well run companies do not get sued
Reasons for D&O cover
There are, however, some very important reasons for having D&O cover in place.
For example:
- Even though a company’s liability is limited, a Director’s liability isn’t, so you personally could lose everything
- Directors can be disqualified for up to 15 years or more
- A company may be prohibited from indemnifying its Directors and Officers
- D&O cover can cost a relatively small amount for a great deal of cover
Low minimum premiums
At
9 questions to ask yourself
Before considering D&O insurance, you may wish to evaluate the likelihood and potential damage resulting in a claim. For example:
- Who will be sued?
- Why might they be sued?
- Who will sue them?
- What are the risks?
- How likely is a lawsuit?
- How much can lawsuits cost?
- What is the possibility that the company is sued rather than its Directors?
- Does existing insurance cover these types of claim?
- How does D&O cover protect you?
Let advise you
We can help you gain a full picture of the risks involved and which specific type of D&O insurance you may need.
Claims examples:
A Director was sued by a collection of shareholders for negligence after the company's assets declined. After consultation with a lawyer, the decision was to settle out of court. D&O insurance funded the final settlement as well as the legal costs. The sums involved would have been sufficient to personally bankrupt the director.
A Director was taken to court following claims of wrongful dismissal of an employee. This resulted in an employment tribunal, which is a full-scale legal hearing often lasting for months. In this case, the director was found guilty and had to pay damages. D&O insurance covered both the legal costs and damages.