Directors & Officers Insurance – your assets are at risk

Many people mistakenly believe that as, a director of a limited company, they have no personal liability in regard to their corporate actions, but 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, individuals within a 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 do you 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.

  These claims range from frivolous and occasionally malicious claims made by disgruntled customers who aren't happy with the service they receive, all the way 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

D&O Insurance protects:

• Individual directors & officers
• The entire company or organisation

Cyber liability explained

  Directors, officers and senior staff are covered for their personal accountability. Put in the simplest terms:

• Directors & Officers protects individuals from legal COSTS & PRISON.

  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 seeks personal legal action against individuals they deem 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, and claims from both internal and external sources can lead to criminal or civil tribunals and, of course, huge financial costs.

  Individuals face the loss of personal assets, as well  as 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 of a Directors and Officers policy?

You might be surprised at 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.  

Do small businesses need Directors & Officers insurance?

Time to direct yourself to D&O insurance

  Yes! 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 don't have D&O insurance!

  Government regulations mean the law is more stringent that ever when it comes to the conduct of individuals within companies. The 2006 Companies Act highlights directors' and management responsibilities and duties, so everyone - including those who have a potential claim to make - knows where these individuals might fall short. And anyone can make a claim against a company director, either in a criminal or civil court.  

How can a Directors & Officers policy protect me?

Cover will indemnify individual directors and officers and provide corporate reimbursement for any claim made against the individual director or officer for a WRONGFUL ACT in their capacity of director, officer or employee.

What is (can be) covered?

• Cover includes costs and legal expenses for individuals in preparation for attendance at official and professional investigations.
• Cover for any independent internal investigations.
• 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
  • Past and future directors
  • Extradition proceedings
  • Corporate tax liability (personal liability of directors)
  • Bodily injury and property damage (claims directed to individuals)
  • Disqualification proceedings

 

What limit of cover should I buy?

That’s a difficult question to give one answer to as there won't be a one-size-fits-all solution, but you'll need to consider the absolute total value of your individual wealth. We will guide you towards the policy that's right for you, and advise you on the limit to set.

What is an EPL extension?

An Employment Practices Liability (EPL) extension to a Directors and Officers (D&O) policy provides additional protection for a company and its directors, officers and employees against claims arising from employment-related issues.

  EPL coverage is becoming increasingly vital due to the the Employment Rights Bill, introduced in October 2024, which promises to bring about the 'biggest upgrade in employment rights for a generation' (consultations for this bill will take place later in 2025).

  An EPL extension covers allegations such as wrongful dismissal, discrimination, harassment and other violations of employee rights, when a claim is brought by current, former or prospective employees. This extension ensures a more comprehensive risk management solution, particularly important in today’s increasingly litigious environment.