Directors & Officers Insurance – do you know you could lose your ENTIRE wealth?

Many people mistakenly believe that as a director of a limited company, they have no personal liability in regard to their corporate actions and that is not limited just to directors, proceedings can be issued against people in almost any managerial or supervisory position.

Could that be you?

The truth is that while most corporate bodies are protected through public liability and other insurances, the individuals within the company are often unprotected: particularly where they have acted without proper authority or breached any part of the Companies Act, however inadvertently. Why all businesses require Directors & Officers insurance Why does your company need directors and officers insurance? Broadly speaking, personal claims or proceedings against directors or officers can arise from any decision made, or act carried out, in the workplace however innocuous it may have seemed at the time. These range from frivolous and occasionally malicious claims made by disgruntled customers who weren't happy about the service they received, all the way through to official investigations. Claims and proceedings where personal liability can be involved also typically include: •Claims by investors and shareholders who blame directors personally for their losses •Actions brought by liquidators, where they suspect wrongful trading or incorrect payments to creditors •Actions brought by HMRC where insolvent trading or misappropriation of tax payments is suspected •HSE investigations where negligence is suspected •Police and SFO investigations where fraud is suspected The importance of personal protection for all officers Cyber insurance & why it is a necessity It is important to note that while the legal definition of a director is reasonably clear, the legal definition of an officer is vague enough to allow claims or proceedings to be issued against people in almost any managerial or supervisory position. So while you may be confident that all of your company's directors are aware of their legal responsibilities, it is vital to understand that problems can be caused inadvertently by individuals at many levels of an organisation. The practical benefits of directors and officers insurance Every business director or senior employee The trouble with certain insurance policies is their title doesn’t really explain what it is that’s covered. Directors & Officers (D&O) or Management Liability doesn’t give you much of a clue of the vast protection provided by these relatively new policies. We are going to try and illustrate The Power of Directors & Officers Insurance. D&O Insurance protects: Individual Directors & Officers The Company and Organisation Cyber liability explained Directors, officers, senior staff are covered for their personal accountability, the personal liability of the individual. Put in the simplest of terms… Directors & Officers protects individuals from legal COST & PRISON What about a serious GDPR breach? Why you need to consider a cyber liability policy Exposure to individual liability is increasing year by year. Whether it be from government bodies, employees or creditors. Directors are in the firing line from anyone who is seeking personal legal action against individuals who they see as guilty. Claims can come emerge from a vast array of ever present modern risks such as Health and Safety Legislation, Data Protection, Employment and Bankruptcy. Claims from both internal and external sources can lead to criminal tribunals or civil litigation and of course huge financial costs. Individuals face the loss of personal assets along with their reputation. While a Limited company has limited liability, the exposure to an individual is only limited by their wealth, their ENTIRE wealth!! What’s the cost? You might be surprised with how low D&O insurance premiums are. Typically, we see a SME with a turnover of £1 to £5M paying around £500-750 for an annual policy with a limit of £1,000,000. Would you like to know more? The Health & Safety Executive have great success directing claims at individuals. In fact, we believe, actions against individuals have increased by 3 times in recent years. Their focus on individuals makes sense as the result of a successful prosecution achieves strong headlines and sends a clear message to an industry or business sector. The resulting ‘peer fear’ heightens awareness and quickly drives other individuals to improve their businesses. A win win for the government body. Do we need Directors & Officers Insurance? Time to direct yourself to D&O insurance Small businesses might think they are under some kind of radar but there are just as vulnerable as large companies. In fact, SME’s are generally an easier target especially if they are without D&O Insurance. Government controls are increasing in terms of the operation of companies and conduct of individuals. The 2006 Companies Act read more highlights directors and management responsibilities and duties while at the same time places a clear target on directors’ and management’s backs allowing others to attack them. Anyone can take a Company Director to the Civil Court over a breach of Civil Liability Government Agency (e.g. HSE) can commence criminal proceedings against a Company Director through the Criminal Court It is a worrying fact that where a Criminal Court has to find a director guilty of the charged offence ‘beyond all reasonable doubt’, a Civil Court case will be awarded against the director ‘on the balance of probability’. How does Directors & Officers Insurance protect us? A good D&O policy will provide you with a Directors & Officers lawyer. These guys are specialists in protecting individuals and firms. Even a criminal lawyer isn’t as specialist as an insurance company appointed D&O lawyer. Cover will indemnify individual directors and officers and provide corporate reimbursement for any claim made against the individual director or officer for WRONGFUL ACT in their capacity of director, officer or employee. Cover includes costs and legal expenses for individuals in preparation for attendance at official and professional investigations. On occasion it is prudent for the company to instigate an independent internal investigation. This certainly looks good in the eyes of any attacking government authority. The costs of this investigation are paid for by the insurance company. What is (can be) covered? Defence Costs and Legal Representation for Directors, officers and employees against: Breach of duty or trust Negligence, Error or Omission Misrepresentation, Misstatement or Misleading Statement Libel Slander – Defamation Health & Safety and Corporate Manslaughter Employment Practice Wrongful Act Violation of Companies Act or Bribery Act Shareholders derivative actions ANY MATTER WHERE CLAIMED AGAINST AN INSURED PERSON WHILST IN THE CAPACITY OF AN INSURED PERSON Past and Future Directors Extradition Proceedings Bail and Civil Bonds Corporate Tax Liability (personal liability of directors) Bodily Injury and Property Damage (claims directed to individuals) Disqualification Proceedings This is just a typical example of the cover available from the current UK insurance market. What limit of cover should we buy? That’s a difficult question to give one answer to. However, perhaps consider the absolute total value of your wealth and then buy protection sufficient to cover that sum…… It is possible to obtain low limits of cover for D&O but we would suggest the extra cost to obtain more meaningful and relevant cover isn’t much more.