As a company officer or director, you can be held personally liable for decisions that you have made or actions that you have taken that go beyond the responsibilities of your role.
This means that should an employee, shareholder or regulatory body find fault with your decision making, they can make claims against you, with the cost of legal advice and paying damages coming out of your pocket.
Examples of claims could include a breach of trust, negligence or breach of care on your park. Claims can also be brought against you for wrongful trading, making misleading statements, or making other types of error or mistake.
Do you think you could manage the cost of rebuffing such claims? A Directors’ and Officers’ Liability insurance policy (D&O) can assist you with covering the cost of professional legal representation, as well as assist in the payment of compensation to the claimant(s).
Examples of claims
1. A rival business makes a claim against a director for allegedly slanderous comments made in public which damaged the reputation of the competitor’s company.
2. A director accuses another director of mismanaging fund.
A D&O insurance policy will usually cover every official within your company. It will also cover ‘wrongful acts’ committed by all current and former company officers and directors. When expanding, you may struggle to attract talented individuals to your boardroom if your company does not hold D&O.
D&O only covers you for future claims. Any legal action that you are involved in when purchasing the policy will be excluded from the terms of the policy. You may also be required to sign an agreement to confirm that you aren’t currently aware of any current or potential claims.
So, what do I need to consider?
The number of directors and officers that you have on your board.
A small business with 2 or 3 directors might need £1 million in cover.
The scope of your business and its activities
A larger organisation might need anywhere between £50m – £300m
Should you not hold a D&O policy, your directors and officers face a greater risk of being unable to afford the costs of defending themselves against:
• Civil proceedings which can carry considerable legal costs and awards for damages
• Disqualifications from holding the position of director
• Criminal prosecution which can lead to fines and possible imprisonment
