Directors and Officers Insurance

Directors and Officers Insurance

If you are a director or senior manager at a limited company, a trustee at a charity, board member at a club, committee member at an association, member of a residents association or property management company you can be susceptible to personal litigation costs because of your role.

Directors and Officers is given a variety of names by insurers and dependent on the nature of the organisation being covered may also be referred to as, Management Liability or Trustees Indemnity cover.

Purchasing directors and officers insurance protects a company’s directors and decision makers from litigation following wrongful acts. Such wrongful acts are defined by insurers as breaches of trust, breach of duty, neglect, error and wrongful trading.

If a director or decision maker is shown to have failed to uphold their duties and responsibilities, civil, regulatory or even criminal prosecutions can be raised against them personally. Directors and officers insurance is there to cover the defence costs and any compensation awards made against the senior management.

Claims Examples:-

An allegation of a director causing the bankruptcy of his firm and being sued for the company losses

The defence costs due to a Health and Safety investigation following an injury of an employee

A former employee makes a claim for unfair dismissal against senior management, the insurers provide cover for defence costs

It may be that your company’s constitution states that claims made against a director will be paid for by the company itself. However, if this is the case the cost of defending a claim made against a director and any subsequent awards raised if the defence is unsuccessful may onerous even for the company to withstand. The insurance cover provided will give your company the reassurance that it can the meet the costs of defending a claim made against senior management.

Often Directors and Officers is purchased with two additional policies:-

Employment Practice Liability

Rather than covering the directors and senior management this safeguards the company and its employees against defence costs and awards of employment claims arising, such as allegations of:-

Constructive Dismissal
Unfair Dismissal
Sexual Harassment

Corporate Legal Liability

This covers the company rather than the senior management against defence costs and awards associated with events such as:
allegations the company has breached regulations, for example Tax, Health & Safety or Trading Standards claims by investors or shareholders
direct financial loss from employee dishonesty.

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