Common misconceptions about Directors & Officers insurance (D&O)
July, 2015
“Isn’t D&O cover only for those running publicly traded or very large businesses?”
“I’m never going to be in the position where I could be sued by one of my employees or stakeholders.”
“It’s just too expensive to consider on top of all of my company’s other insurance costs.”
These are just a few of the queries and comments we get when asking companies whether they have thought about purchasing Directors & Officers insurance.
Here are some important reasons why you should consider D&O cover
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.
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.
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.
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
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.
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.
Your investors can sue you
If investors lose value in their shares a s a result of a director or company’s alleged misconduct they could seek compensation via the courts.
Just to prove a point:-
- Claims Example
An engineering company dismissed an employee for poor performance without following a fair dismissal procedure. The employee subsequently made a tribunal claim for unfair dismissal and an agreement was reached to pay the employee £50,000. - Claims Example
The director of a management consultancy is quoted in the press as making some derogatory remarks about one of it’s major clients, based on the information they held about them. As a result, the client sued the company and the directors alleging defamation and breach of confidentiality. The Information Commissioner’s Office is investigating the company and the directors in respect of their data protection obligations.
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Or you can Even look through our D&O Product page to give you more information
