D&O

Insurance for Directors and Officers of companies

Shared culpability is how the legal system views Directors and Officers of an organisation - even non-executive directors can be held liable for the actions of other directors. Which means you could end up fighting a court battle over something your colleague did, even if you didn’t know they were doing it.

The last few years have seen a rise in claims on Directors’ and Officers’ (D&O) policies, due to more stringent governance guidelines and increased oversight by regulators.

There are plenty of insurers willing to take on this risk: the challenge is choosing the right one.

What does Directors’ and Officers’ insurance cover?

Directors’ and Officers liability insurance gives financial protection in the event you are sued personally. D&O protects you from claims made against you or your co-directors within the scope of your everyday business. It is there to cover you for legal costs as well as any damages.

What does good D&O insurance look like? What to look out for:

D&O insurance is there to pay for costs relating to mounting a defence, and any damages or settlements relating to the matter. Any allegation made by a third party against a director or officer, no matter how frivolous, needs to be rigorously defended: otherwise, there is a risk of judgement being entered in default of a defence.

• Entity cover for employment practices liability claims
• Official investigations
• Crisis management
• Entity cover for securities claims (for listed companies)
• Retired directors

Other areas that give rise to claims include:

• Positions on outside boards
• Wrongful termination, sexual harassment or discrimination
• Initial public offerings

Directors and Officers can be held liable for their own actions and inactions, and the actions of their co-directors. Directors’ personal liability for the performance of a company is unlimited. If the shareholders want to sue for mismanagement, they can -and quite frequently do.