Are you a Company Director or Senior Executive?

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”) liability 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 executive management 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, errors and omissions of others.

Potential complaints

The number of individuals and organisations who can bring a claim against company directors and senior executive officers are:

  • Shareholders
  • Customers
  • Employees
  • Suppliers
  • Contractors
  • Regulatory bodies
  • Creditors
  • Competitors
  • Distributors
  • Liquidators and receivers
  • Government bodies

Coverage

A specialist D&O insurance policy provides cover for losses resulting from wrongful acts including:

  • Damages, judgments, settlements, crisis costs, PR costs, prosecution and defence costs
  • Errors and omissions
  • Legal representation expenses
  • Employment-related wrongful acts
  • 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 defence 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.