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Directors' and Officers' insurance
Protection for managers and board members
Protection for Directors and Officers
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.
One for all and all for one. Or 'jointly and severally liable', to use the legal term.
The last few years have seen a rise in claims on directors’ and officers’ policies, due to Hong Kong's changing regulatory environment 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’ (D&O) 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 vigorously defended. Otherwise, there is a risk of judgement being entered in default of a defence.
- Damages and claimant’s costs
- Legal costs for successful defence against allegations
- Representation at official investigations and inquiries
- Entity cover for employment practices liability claims
- Allegations made by fellow directors, officers, or employees
- Retired directors
Coverage extensions:
- Libel and slander
- Intellectual property
- Pollution
- Joint venture liability
- Outside directorships
- Occupational Health and Safety defence costs
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 do, quite frequently.
D&O claims breakdown
According to claims figures from a leading D&O insurer, you need to worry about:
Regulators
4 in 10 D&O claims relate to regulatory governance
Clients / competitors
3 in 10 claims arise from clients or competitors
Employees
2 in 10 claims come from disgruntled employees
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Directors' and Officers' insurance (D&O)
Tailor-made D&O starts here
What is covered
Legal costs
Subject to the terms of the policy, D&O will cover the legal costs of defending your reputation, including criminal proceedings.
Compensation payments
D&O insurance will pay damages arising from alleged acts, errors and omissions.
Investigation costs
D&O covers day-to-day costs relating to responding to a variety of investigations, including attending interviews with insolvency practitioners.
Director disqualification proceedings
D&O covers costs relating to defending directors from being disqualified from holding office.
Personal liability for corporate tax
Where individual directors are held liable for corporate taxes due, D&O can step in to pay.
Extradition proceedings
Providing finance to mount resistance to extradition requests.
Not covered
Criminal fines and penalties
This includes FCA fines, or any other liabilities that are uninsurable as a matter of law.
Proven dishonest or fraudulent conduct
However, if such conduct is alleged, the policy requires insurers to provide legal costs on an ongoing basis, unless/until proven guilty
Optional
Run Off Cover
Where directors retire or companies are sold, run off cover offers the indivduals protection should claims be reported relating to their tenure with the organisation.
Distressed situations
When faced with distressed situations in the business, for example insolvency, many directors choose to revisit their policy and examine limits and terms before proceedings begin.
Why choose Howden for D&O?
Howden’s D&O team offers the marker leverage and expertise to deliver for clients, providing solutions to what can seem to be insurmountable issues.
Our team advises on the specific coverage limitations and implications and engages with insurers who are willing to specifically underwrite policies we present.
Writing our own bespoke policies means wordings are designed to be favourable to the insured, so you can have the utmost confidence you will be protected.
$1.2bn
premium placed into the Financial Lines market in 2022
30
in-house lawyers and senior claims handlers
Everything is focused on the prompt payment of claims
For an insurance broker, the connection between claims and account management is the difference between happy or irate clients, and good outcomes versus bad ones.
We make sure that our legal, technical & claims specialists are involved throughout your insurance cycle.
Our claims advocates and lawyers are fully embedded into the end-to-end client service process, right from the policy design phase. From the outset, they work with the account management team to get your wordings right. They are on hand for technical queries through the policy period. Then they handle any claims that arise – and so carry that knowledge of your business and your wordings throughout the whole process.
Finally, they feed this back in to your account management team at renewal – using what they have learned, to drive the best cover, structure and price. A continual cycle, driving challenge and improvement.
Our legal, technical and claims specialists deal with D&O claims, day-in day-out. They are deeply experienced in handling large, complex and high-profile cases.
Unlike other brokers, we don’t outsource our claims function, or treat is as a back-office thing. To us, claims is the engine room and should be front and centre of the whole placement process.
Howden's Fund D&O Insurance portal
At a time when efficiency and quality are essential, our Fund D&O portal has been uniquely constructed with both in mind. Not only does the portal deliver on the most competitive premiums, but does this on our bespoke Howden written D&O policy wording.
We have partnered with Newline, Allied World Assurance Company, Starr and Sompo, to create a portal offering backed by 100% AM Best A-rated capacity.
Report: D&O 2024 Outlook
Our latest D&O market report examines current trends and their effects on premium pricing going forward.
Meet the team
Executive DirectorKurt Rothmann
LinkedInExecutive DirectorKurt joined Howden in November 2020 after spending 8 years at JLT. He has worked with many large and complex multinational clients providing strategic advice, programme design and service delivery. Kurt has 27 years of insurance industry experience, including 7 years in Johannesburg before moving to London in 1999. At both JLT (and Aon before that) he headed up the management liability team. Prior to his career in insurance, he studied law at the University of Cape Town, graduating with a BA LLB. After being admitted to practice as a solicitor in South Africa, he moved to work in-house with one of the then largest South African insurance intermediaries, Glenrand MIB.
Executive DirectorExecutive DirectorLianne has spent most of her career at Howden and has over 20 years’ experience placing International bespoke risks into the London and global insurance markets. Although experienced across all classes of financial lines she brings particular expertise in delivering highly complex and tailored solutions within the Directors and Officers class. She works with multinational organisations and large government institutions navigating rapidly-evolving exposures across highly-regulated sectors. A particular specialism for those organisations with US exposure be that foreign issuers to US exchanges, IPO’s or reverse merger / despac transactions.
Divisional DirectorDivisional DirectorWith over 26 years' worth of experience, Adam specialises in handling and placing Directors’ and Officers’ Liability, Crime, Financial Institutions Professional Indemnity and Investment Management Insurance in the UK, EEA and Australia. Adam helps a range of of large corporate and SME clients in sectors such as accountants, solicitors, financial advisers, property valuers, property management, investment platforms and investment managers.
Divisional DirectorDivisional DirectorMichelle joined Howden in 1999 and has over 22 years’ experience in Financial Lines, specialising in Directors’ and Officers’ Liability policies. She has extensive experience with both international and UK clients working on large and complex placement structures. Michelle’s role includes responsibility for client service within the International division of FLG overseeing a team of 15+ Account Executives. She also works with FLG’s Legal & Technical team on the drafting of Howden’s flagship D&O products, provides technical resource both internally and to clients and contributes regularly to FLG’s Thought Leadership output.