What is Quarry & Aggregate Insurance?
Why are individuals so vulnerable?
- Employees are increasingly likely to sue
- Legal liability is shifting towards personal liability
- Regulators are now more proactive in investigating companies
If a director or officer is perceived to have failed in any of their duties, then a claim could come from any number of third party sources
Why YOU need directors and officers insurance?
It’s essential for companies looking for external funding
It’s common for investors interested in a company to make D&O insurance a must-have requirement. This protects directors and officers from allegations of mismanagement. D&O cover provides protection against legal action, fines, penalties, and disqualifications from being a director.
It provides protection from three angles
D&O cover provides three-sided protection. One side covers directors personally for fines, penalties and legal expenses. The second reimburses the company for paying on behalf of the directors. And the last covers the company should it itself be named in the lawsuit.
Professional indemnity cover isn’t enough on its own
It’s a common misconception that personal liability claims are covered under professional indemnity, but this is unlikely. A separate D&O policy is the only way to guarantee personal protection for those with management responsibility in your business.
Why does your company need directors and officers insurance?
Because you can face frivolous and occasionally malicious claims made by disgruntled customers who aren’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:
- Investors and shareholders who blame directors personally for losses
- Actions brought by liquidators, where they suspect wrongful trading
- HSE investigations where negligence is suspected
- Police and SFO investigations where fraud is suspected
- Actions brought by shareholders, creditors & regulatory bodies
- Claims by employees, auditors, liquidators, customers and suppliers
- Claims by HMRC where insolvent trading or misappropriation of tax payments is suspected
Many 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.
It’s there to protect you financially against any claims made against you personally as a director, partner or officer of your business. From health and safety concerns to a claim for breach of duty, negligence, defamation or even pollution, our insurance will cover you against the costs of defending or settling legal or criminal actions.
It would be great if you could predict when something might trigger legal action or a claim for compensation against you. But you can’t, so it’s a good idea to have insurance no matter what type of business you’re in. It’s better to know you’re protected against any legal costs, fines or compensation claims made against you than to face the financial burden yourself.
The level of cover you need will depend on what you do for a living and the kinds of risks you’re likely to be exposed to. We can cover you from £100,000 to £10 million but your policy is as personal to you as your job is. We’ll work with you to figure out exactly what you need and we’ll tailor your policy to your sector and your role.
Our Directors & Officers Insurance product has been designed to provide the widest possible cover alongside 24 hour legal support provided by our partner rRadar.
The duties of directors and officers has been established through statutes, regulations and case law and can be broken down into various areas:
– The duty of care and skill
– Fiduciary to act honestly, in good faith
– Companies Act 2006
– The Modern Slavery Act 2015
– Criminal Finances Act 2017
– Defamation Act 2013
– Insolvency Act 1986
– Financial Services Act 1989
– Environmental Protection Act 1990
– Health and Safety at Work Act 1974
– General Data Protection Regulation
– and more
Frequently Asked Questions
Directors and officers (D&O) insurance policies offer liability cover for company managers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties.
Any allegations of wrongdoing need to be investigated and defended, and this can cost a significant amount even if the case doesn’t reach court. This means directors’ and officers’ personal finances are at risk, so it’s essential companies provide protection through directors and officers (D&O) liability insurance
If your directors or management team have legal or regulatory responsibilities to employees, the public, regulators, investors or other directors, then D&O liability insurance should be considered. It is particularly important for companies who have raised or who are seeking investment from external shareholders. All firms that fall under the Senior Managers Certification Regime (SMCR) have an increased risk in making sure they act appropriately. D&O is even more relevant for these firms as it ensures your employees are covered if they unintentionally run afoul of their regulatory responsibilities.
D&O personal liability claims can cover a whole range of issues, from breaching health and safety laws, allegations of cyber-bullying, to misrepresentations in a pitch deck, or errors in financial reporting.
- Employees know their employment rights and are increasingly likely to sue
- Legal liability is shifting away from companies and towards personal liability
- Regulators are now more proactive in investigating companies
If you have shareholders that own 15% or more of the company, then check for a “major shareholder exclusion” – this effectively excludes any claim brought by a shareholder against the business that owns 15% or more of the company’s shares. And should you have shareholders, business activities or contracts, make sure your jurisdiction allows for worldwide claims. Another thing is to make sure your limit is high enough, as many D&O plans have an aggregate limit, meaning another director/officer could use it up, should a claim be made – leaving you exposed.
The core purpose of a D&O policy is to provide financial protection for managers against the consequences of actual or alleged “wrongful acts” when acting in the scope of their managerial duties. The D&O policy will pay for defence costs and financial losses. In addition, extensions to many D&O policies also cover costs for managers generated by administrative and criminal proceedings or in the course of investigations by regulators or criminal prosecutors.
These coverage extensions are gaining more and more importance among company directors. In this way, managers receive comprehensive, integrated cover that ensures them a reliable, consistent and structured legal defence.
There are different risks in different markets. The United States is by far the world’s largest D&O market with a premium volume of around $6 billion, and there the most frequent source of claims are claims related to employment or HR issues such as discrimination, sexual harassment or wrongful termination. From 2000 to 2008, over 40% of D&O claims in the US were employment related claims. In most cases the managers did not act themselves; they simply did not enforce employee conduct rules against discrimination and harassment.
While these are the most frequent claims in the US market, they are not the most expensive ones. The severity of securities claims is much higher. Insurers are watching closely whether shareholder activism and class-action lawsuits are on the rise, but the frequency of these claims seems to have stabilised at its current high level. In other markets worldwide, shareholder claims are on the rise along with the general trend of increasing shareholder right
This could be a breach of trust, breach of duty, neglect, error, misleading statement or wrongful trading, committed or attempted by a director or officer whilst acting in this capacity on behalf of the company.
All current, future and past directors and officers of a company and its subsidiaries are covered under a D&O policy, which can also include non-executive directors. In very specific cases, like securities claims, the policy can even be extended to cover claims against the company itself. Cover is usually taken out and paid for by the company. Depending on the respective local law and policy, this may or may not be viewed by legislators as a “benefit-in-kind” for those persons it covers
No, directors & officers insurance is by no means a ‘get out of jail free’ card. It’s there for when a genuine grievance arises against a company officer or director in the scope of performing his or her official workplace duties. It’s for this reason that it falls into the ‘liability’ insurance category. The policy simply protects the personal financial assets of the accused, while any subsequent reviews or investigations of their alleged conduct are undertaken. Together with covering any legal defence fees in the event the hearing makes it to court.
D&O insurance has no bearing whatsoever on the outcome of an investigation. Nor on the amount of any compensation paid out in the event of an out of court settlement. It merely provides the director or officer at the centre of the investigation with financial protection of his or her personal private assets, while the necessary investigations ensue and the process takes its natural course.
As a director or company officer, it’s your job to protect the best interests of the business you manage, including your employees, customers and any shareholders. If you take a decision that for, all good intentions, ultimately has a negative impact on company profits, stock value or reputation, you could be held personally accountable for those losses and depreciation in value. At this point, a claim could be made against you personally for which you, not the company, are financially liable.
It’s for this reason that more and more organisations are turning to D&O insurance to protect their directors & officers personal liability. As personal claims singling out named individuals, rather than companies, increase in frequency, director’s liability insurance offers your directors and company officers financial protection – something that can’t be undervalued in an age where culpability and the ‘blame game’ is becoming ever more prevalent, and company directors increasingly are scapegoats in order to ‘save’ a business.
Director’s liability insurance can step in at such times, protecting personal assets by covering the cost of any legal fees or successful compensation claims for which the named director or officer would otherwise be personally liable.
An important thing to bear in mind is that cover isn’t exhaustive, meaning there are certain actions and behaviours which won’t be protected under the terms of your arranged cover.
You can find these exclusions as part of your policy wording, and the majority of reputable insurers will also make you aware of these from the outset too. While the specifics of these exclusions will vary from policy to policy, and insurer to insurer, there are some common exemptions across the board to be aware of.
For the most part, D&O insurance won’t cover any instances of criminal wrongdoing or illegal activity on the part of your director or officer. Nor will the policy offer protection for claims or accusations that arose prior to the insurance start date.
These exclusions typically include (but aren’t limited to):
- Criminal acts such as fraud or money laundering
- Damage to property or bodily harm (except corporate manslaughter)
- Deliberate acts of non-compliance
- Any illegal activity
- Pre-existing claims
- Grievances already in effect at the time the policy was taken out
So even those with a directors & officers insurance policy can still find themselves at risk should they breach the terms of their agreement, or indulge in behaviour outside the remit of the law.
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