Director's Liability & Officer's Liability Insurance

If you are a Director, Financial Director or a Non-Executive Director in a private limited company. You are in a position of authority, you are accountable and therefore personally exposed.

Our corporate insurance scheme is aimed at those Directors, Officers and Non-Executive Directors who see the benefit of buying individual liability cover privately.

Directors & Officers Liability Insurance was at one time considered only essential for large public corporations and claims were rare against Directors. With the increase in the litigious nature of society in general there has been an increase in claims made against Directors, some of which now have an increasingly firm foundation in law and others may have no foundation but be costly and an enormous distraction.

Alternatively, you might also be worried with the direction the firm is heading in or new strategies that are being adopted that you don't agree with or have any control over.  Either way you are personally exposed, whether you hold equity or not, and the exposure costs even if your actions have caused no loss.

Directors & Officers are seen as agents for the company and therefore liable for losses the company incurs as a result of errors of judgement or action. Directors and Officers have many obligations both in common law and in statute. Claims can now be brought about by any party that has an interest in the affairs of a company. If a shareholder or third party has lost out as a result of your actions as Director or Officer you could be accountable.

Key operational areas that show the real need for corporate liability insurance cover:

Health & Safety
Breaches of HSE regulation may result in costly and time consuming investigations. In one instance nearly £900,000 was spent defending a Managing Director and several Managers as they faced a criminal prosecution for negligence and failure to provide a safe working environment.

Non-Executive Directors
Non-Executive Directors can also be held liable. This was clearly highlighted in a case where a full-time Director defrauded the company and Non-Executives were found to be negligent. The negligence was due to insufficient attention being paid to the operation of the firm. The claim was settled for an undisclosed sum and was paid out of the Non-Executives' personal assets. This clearly illustrates that Non-Executive Directors in the UK are principally involved to ensure that there is a second pair of eyes on the Company's Executive Management. Non-Executives are often exposed to liability just as much as their Executive counterparts which is not something they always recognise.

Negligence

Example 1
Two Directors were held liable for payments made to another Director.  The payments took place shortly before the company went into liquidation.  It was successfully argued by the firm's creditors that they should take precedence over the Director and an award of £800,000 was made.  Directors have a fiduciary duty to take the correct course of action. It is also an established part of the UK legislative framework that Directors should not profit from their position.

Example 2
A Financial Director was asked by the Board to exercise a break clause on a property surplus to requirements. He failed to carry out the instruction properly leaving the property on continued rent for a further 5 years. Initial reserve £400,000.

Example 3
Defence costs totalling approximately £16,000 were paid after a Director was held responsible for allegedly failing to arrange death-in-service insurance coverage.

Defamation
Directors can often be sued for comments concerning competitors, as one Director found to his cost recently. His comments regarding one of his company's key suppliers cost Insurers £32,000 before the case was dropped by the claimant.

To obtain further information please contact us today on 0161 833 2100.