Directors & Officers Insurance
- Top 10 reasons for D&O at a glance:
- Directors’ personal assets are at risk
- Investigations by regulators are getting more and more common
- Defending a legal action can be costly
- Employment practice claims remain a large threat to directors
- Your investors can sue you
- Protection in case of bankruptcy or insolvency
- SMEs are just as vulnerable as large companies
- D&O claims are NOT covered under any other liability policy
- D&O insurance is more affordable than ever
- D&O helps attract talent
One of the most discussed and least understood insurance products is Directors & Officers Liability (D&O) Insurance. Market watchers note that even some lawyers have their problems comprehending what kind of coverage the insured managers have. Headlines are full of stories about "mega claims" of several billions of pounds along with more and less informed commentaries discussing the principles of this kind of insurance cover.
As insurance brokers, we are able to explain the cover and bring as much clarity as possible to the subject of D&O insurance.
Common misconceptions are that D & O insurance is only for those running publicly traded or very large businesses or they're never going to be in the position where they could be sued by one of their employees or stakeholders. Others think it is just too expensive to consider on top of all of their other company insurance costs where as in reality the truth is everyone is susceptible and it isn't as expensive as you may think.
- Top 10 reasons to buy Directors & Officers Insurance Explained
- Directors’ personal assets are at risk. If a director has been accused of breaching their duties, they are personally liable to defend the claim. Their personal assets are potentially at risk if they do not have adequate D&O cover.
- Investigations by regulators are getting more and more common. Investigations and fines imposed by a regulator or body such as the Health & Safety Executive are one of the primary drivers of claims in the current UK business climate.
- Defending a legal action can be costly. Legal costs for defending allegations against the company or one of its directors can often run into tens of thousands of pounds.
- Employment practice claims remain a large threat to directors. In an increasingly litigious society employment practice claims such as sexual harassment or wrongful dismissal can result in astounding settlements.
- Your investors can sue you. If investors lose value in their shares as a result of a director or company’s alleged misconduct they could seek compensation via the courts.
- Protection in case of bankruptcy or insolvency. If faced with bankruptcy or insolvency, creditors may pursue legal action against directors if they feel that they have not acted in their best interests.
- SMEs are just as vulnerable as large companies. SMEs are not exempt from D&O claims; they face exactly the same risks and regulations as their larger peers, but often do not benefit from in-house HR or legal teams.
- D&O claims are NOT covered under any other liability policy. A common misconception is that alleged misconduct by directors or companies is covered under other liability policies such as Professional Indemnity.
- D&O insurance is more affordable than ever. A D&O policy can cost from under £500 per year, yet the total cost of a D&O claim can run into hundreds of thousands, if not millions of pounds.
- D&O helps attract talent. Not having D&O insurance in place may put off talented individuals from joining a company as they will not be protected.