Directors’ and Officers’

Right now, Directors’ and Officers’ liability cover (D&O) is one of the most relevant insurance products, with directors facing an increasingly litigious society and an ever-evolving legal environment. With the current economic climate leading to an increase in claims, D&O offers essential protection, yet many companies aren’t aware of this.

Why is D&O insurance needed?

Even in a company with limited liability status, directors and officers have unlimited personal liability. This means directors’ and officers’ personal wealth is at risk and it’s the company’s responsibility to protect them.

Allegations, even if they’re unfounded, need to be investigated and defended. The costs of keeping a claim from reaching court can be substantial.

Directors and officers are vulnerable on all sides:

  • European legislation – Directors and officers must ensure the company does not breach any European legislation, but with such diverse responsibilities it can be difficult to stay up to date on the latest directives.
  • Creditors/insolvency claims – These types of claims are being brought more frequently,and directors and officers can be singled out for such claims.
  • Employee claims – Unfair dismissal, failure to promote, negligent evaluation, harassment or discrimination – there are thousands of claims brought against directors and officers every year.
  • Regulators – Companies face investigation from legal bodies such as the Health & Safety Executive and Department of Trade & Industry and other industry-specific regulators, and the associated costs can be significant, even if no wrongdoing is proved.
  • Shareholders – Following some high-profile claims, shareholders now scrutinise the activities of directors ever more closely, and there are more requirements for transparency of directors’ decisions.

Case Studies

An allegation of slander was made by a customer against an officer of a company (a clothing retailer). Allegedly comments were made by the manager in public, which supposedly damaged the reputation of the customer. A threat to take the manager to court was made unless a settlement was forthcoming, which was negotiated at £26,500 and covered under their Zurich D&O policy.

An employee was dismissed for gross misconduct after a violent altercation at work. The company Disciplinary Committee judged he had brought the company into disrepute and their decision was in line with the rules and procedures set out in the company handbook. The employee brought an unsuccessful claim for unfair dismissal and legal costs of £7,900 were paid under the D&O policy.

Prior to making an investment in a company, an investor was given details of the company’s solvency and profit. Following the investment, it became clear that the solvency level and profit levels had been misrepresented. The directors had over-stated the company’s financial position to encourage investment. The D&O policy paid out £10,000.

These examples show that the right policy can protect you against all manner of claims. Contact us today to discuss your D&O insurance needs and we will help to ensure you are properly covered.