Why you need D&O insurance as a company leader

[vc_row][vc_column][vc_column_text]If you are a company director or a senior manager, you may think that your position gives you immunity from personal liability. After all, you are acting on behalf of the company, not yourself, right? Wrong. In fact, your role exposes you to a variety of legal risks that could jeopardise your personal assets and reputation. That’s why you need Directors and Officers insurance, also known as D&O insurance, to protect yourself from the potential consequences of a claim against you.

What is Directors and Officers insurance?

Directors and Officers insurance is a type of liability insurance that covers the costs of defending yourself against allegations of wrongful acts in your capacity as a company leader. Wrongful acts include:
  • Breach of duty of care
  • Breach of trust
  • Neglect
  • Error
  • Misleading statements
  • Wrongful trading
Directors and Officers insurance can also cover the losses you may incur as a result of an unsuccessful defence, such as compensation, damages, fines or penalties. However, it does not cover intentional or fraudulent acts, or claims made against the company as a whole.

Who can sue you as a company leader?

As a company leader, you have various duties and responsibilities to different stakeholders, such as:
  • Shareholders or investors
  • Employees
  • Customers
  • Suppliers
  • Creditors
  • Regulators
  • Competitors
  • The public
Any of these parties can sue you personally if they believe you have breached your obligations, violated the law or caused them harm. For example, you could face a claim from:
  • A shareholder who accuses you of mismanaging the company’s funds or making false statements about its performance
  • An employee who alleges that you discriminated against them, harassed them, or failed to promote them
  • A customer who claims that you sold them a defective product or service, or breached a contract
  • A supplier who asserts that you did not pay them on time or at all, or reneged on a deal
  • A creditor who demands that you repay the company’s debts from your own pocket, or holds you liable for the company’s insolvency
  • A regulator who investigates you for breaching the rules of your industry, or failing to comply with health and safety, environmental, or data protection laws
  • A competitor who accuses you of infringing their intellectual property rights, or engaging in unfair or anti-competitive practices
  • A member of the public who sues you for causing them personal injury or property damage, or defaming them

What are the consequences of a claim against you?

A claim against you as a company leader can have serious consequences, such as:
  • Legal costs
Defending yourself against a claim can be expensive, especially if it involves hiring lawyers, experts or consultants - or going to court. You may also have to pay for the costs of the other party if you lose the case. If you are found liable for a claim, you may have to pay a large amount of money as compensation, damages, fines or penalties. This could deplete your personal savings, or force you to sell your assets, such as your home or car.
  • Reputation damage
  • A claim against you can damage your reputation as a company leader and affect your credibility, trustworthiness and employability. You may also face negative publicity, media scrutiny or social media backlash.
  • Emotional stress
A claim against you can cause you a lot of emotional stress, anxiety, or depression. You may also have to deal with the impact on your family, friends or colleagues.
  • Disqualification or imprisonment
In some cases, you may face criminal charges or regulatory sanctions for your actions as a company leader. This could result in you being disqualified from holding a directorship, or even being sent to prison.

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How can Directors and Officers insurance help you?

  Directors and Officers insurance can help you by:
  • Covering the legal costs of defending yourself against a claim, whether it is valid or not
  • Paying for the losses that you may incur as a result of a claim, up to the limit of your policy
  • Providing you with legal advice and guidance throughout the process
  • Supporting you with crisis management and public relations services, if needed
  • Giving you peace of mind and confidence to perform your role as a company leader

How to get Directors and Officers insurance?

You can get Directors and Officers insurance from an insurer or a broker who specialises in this type of cover. Compare different policies and providers to find the best one for your needs and budget. You should also check the terms and conditions of your policy, such as:
  • The scope of cover
What types of claims are covered and what are excluded? What is the total amount and individual claim pay out that the insurer will disburse?
  • The excess or deductible
How much money will you have to pay out of your own pocket before the insurer pays anything?
  • The retroactive date
What is the extent of the insurer's coverage timeframe for claims related to past actions?
  • The extended reporting period
How long after your policy expires will the insurer cover claims that arise from your actions during the policy period?
Directors and Officers insurance is not a luxury, but a necessity for every company leader. It can protect you from the personal liability risks that you face in your role and save you from the potentially devastating consequences of a claim against you. Don’t wait until it’s too late. Get Directors and Officers insurance today and secure your future as a company leader.

Other blogs that may interest you:

Directors & Officers premiums on the rise
D&O Insurance: do you know you could lose your ENTIRE wealth?
Directors &  Officers: Motor Trade

Any questions? Please don’t hesitate to contact one of our team.

Matthew.collins@ascendbroking.co.uk  |  Office: 01245 449060

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