What is Directors and Officers’ Liability insurance?

It is a misconception that only large companies need Directors and Officers Liability Insurance as smaller privately held companies are not exempt from litigation arising out of their management decisions; they are also at risk. Reason Global Account Executive Roger Midgley explains why removals businesses of all sizes should consider D&O Liability as part of their cover.

Directors and Officers Liability Insurance (D&O) can also be referred to as Management Liability Cover. It provides a safety net for company Directors and Officers who have a key role in running your business. Unlike liability policies that provide cover for claims arising from property damage and bodily injury, a D&O policy specifically provides cover for company directors or managers for an alleged or actual ‘wrongful act’ whilst acting in their official capacity: such as breach of duty of care, breach of trust, health and safety failure, misleading statements or negligent errors.

“Directors can get so involved in the day to day running of their business that they may not realise they can be held personally liable for their actions.”

Roger Midgley – Account Executive

Why do you need D&O cover in place?

Busy managers are understandably so engrossed in their day-to-day business activities that they may not realise that their actions or decisions can significantly impact them and leave them open to a claim against them personally. Unlike a limited company, directors cannot limit their liability, and as such, their personal assets can be at risk. Regardless of your company’s size, the legal costs to defend proceedings, as well as any compensation costs that arise from an unsuccessful defence, can be considerable.

What other cover is available?

Directors and Officers’ policies can also be extended to include other exposures faced by the organisation, including:

Corporate Legal Liability (Entity) Cover – It is not uncommon for the company to be pulled into a joint action with the Directors as it is not always immediately apparent where the liability lies. This cover is for costs incurred in defending allegations of a wrongful act which is made against the company itself.

Employment Practices Liability – This provides cover for legal claims arising from a wide range of employment-related matters where it is alleged the company has acted incorrectly. This can include scenarios such as unfair dismissal, discrimination, harassment, bullying etc. In recent years we have seen a significant increase in the number of claims arising from these circumstances.

Selling your business – you could still be responsible for your actions whilst you were in control. In this case, directors can obtain run-off cover to cover anything that comes out of the woodwork in the following years.

Call us today on 01273 739961 to learn more about the appropriate protection for your company against potential Directors’ and Officers Liability.