Directors' & Officers' Insurance

If you hold a leadership position and are responsible for making decisions about your company's protocol or investment, Directors and Officers (D&O) insurance may be highly relevant if things go wrong.

This depends on the nature and size of your business and the type of risks you face. A potential claim may be more valuable if you are responsible for a sizeable multi-million-pound company. In this case, you would need a higher level of indemnity. Cover can be arranged from £100,000 up to £10 million, with levels of cover tailored to suit your sector, size, and risk profile.

Many people running SMEs don’t have the resources to cover all the legalities involved, which is where D&O comes in. D&O potentially protects managers from a lack of governance, failure to comply with workplace laws, and the potentially expensive legal action that may ensue.

D&O does not cover prior claims and investigations, deliberate or dishonest acts such as fraud, defined benefit schemes such as pensions based on years of employment and salaries, pollution clean-ups attributable to the Environmental Protection Act 1990, claims from/on behalf of your major shareholder companies, bodily injury, or property damage.

D&O insurance protects claims brought against you for actual or alleged breach of duty, neglect, errors, omissions, and misstatements.

It can help you with the cost of defending yourself against allegations, support you against losses you might experience due to a third-party claim, and cover the financial cost of an investigation.

D&O insurance can offer protection in the event of being accused of a wrongful act, including:

• Breach of duty of care

• Breach of trust

• Negligent errors

• Defamation

• Health & safety failure

• Causing pollution

• Mismanagement of pension schemes

If you don’t have insurance, you are at greater risk of not being able to defend yourself against:

• disqualification from holding the position of director

• civil proceedings, which can lead to hefty legal costs and awards for damages

• criminal prosecution, which can lead to fines and possible imprisonment

Ideally, as soon as an employee is given some key responsibilities because this is the time they may face personal action.

Small businesses will benefit as individual directors will be protected against complaints, or youmay wish to arrange D&O as your company grows—if it’s traded on the stock market, for example, and you are answerable to shareholders.

Sole traders don’t require this cover, as there is no distinction between them and their business. Still, if you register a limited company, you are immediately liable for personal complaints, criminal proceedings, or director disqualification.