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Business Sectors
Directors & Officers
Protect your position
As a company director or senior executive you may incur certain personal liabilities through negligence, default, breach of duty or breach of trust in relation to the company which may leave you open to litigation and exposed to compensation claims, lawsuits, investigations and prosecutions.
In such cases, you could be faced with significant legal expenses and other costs as you seek to defend yourself against allegations or if you have claims awarded against you.
In the absence of any other remedy, you would have to finance such action from your own resources including the settlement of any successful claim which, at worst, could put at risk your home, car, savings and other assets.
Directors and Officers (“D&O”) insurance is designed to provide cover for legal defence costs and, where appropriate, any final settlement or compensation award.
Risk areas
We live in an increasingly regulated world and the risk of directors and senior executives incurring personal liabilities has increased dramatically in recent years especially in the following key areas:
- Involuntary, constructive or gross negligence manslaughter
- Health & Safety legislation
- Sexual, racial, disability or age discrimination
- Wrongful or constructive dismissal
- Wrongful trading such as in the knowledge that the business is or will become insolvent
- Unpaid taxes when the company has become insolvent
- Competition and cartel activity
- Copyright and other intellectual property
- Data protection
- E business
- Environmental issues
You can also be held personally liable for the actions or omissions of others.
Potential complaints
The number of individuals and organisations who can bring a claim against company directors and senior executives are:
- Shareholders
- Customers
- Employees
- Suppliers
- Contractors
- Regulatory bodies
- Creditors
- Competitors
- Distributors
- Liquidators and receivers
- Government bodies
Coverage
The policy provides cover for losses resulting from wrongful acts including:
- Damages, judgments, settlements, crisis costs, PR costs, prosecution and defence costs
- Legal representation expenses
- Costs arising out of extradition proceedings
- Tax contributions where the company has become insolvent and personal liability ensues
- Actions between directors of the same company
- Employment-related wrongful acts
- Whistle blowing
- Pollution
Wrongful acts are typically described as actual or alleged breaches of trust or duty, neglect, error, omission, misstatement, misleading statement, breach of warranty of authority or other acts wrongfully committed or attempted.
Claims examples
The following claims examples are for illustrative purposes only and are not a guarantee of cover which is always determined on a case-by-case basis in accordance with policy terms and conditions:
- A director was sued by one of his distributors for deliberately breaching an exclusive agreement and for using commercially sensitive information within the agreement for personal benefit. His policy funded some £200,000 of defense costs and the distributor eventually dropped the case.
- A director was sued by shareholders for negligence after the company’s fortunes declined rapidly. After consultation with lawyers, it was decided that the best course of action was to settle out of court and his policy funded both the legal costs and the final settlement otherwise the director would have faced personal bankruptcy.
- An HSE investigation into a workplace fatality turned into a full-blown public enquiry which the company director was required to attend. His policy funded his legal representation and enabled him to demonstrate that the fatality had not arisen out of any negligence or wrongful act on his part.
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