D&O - what you need to know
Directors and Officers insurance (D&O) offers financial protection to those who act in the capacity of a director, officer or decision-maker of a company.
This is designed to protect these individuals against the cost of compensatory damages and/or defence costs arising from actions and decisions they take on behalf of the company.
Public liability and products liability policies do not cover the cost of D&O legal actions. Settling these legal actions—even if the director or officer is found innocent—can be costly and bankrupt a company or individual. Many companies choose to purchase D&O insurance to protect their executives from legal expenses and personal liability exposures.
Types of legal actions that affect directors and officers include:
- Breaches of Companies Act
- Breaches of Confidentiality
- Insured vs Insured
- Cyber hacking issues – failure to implement the correct protective measures
- Conflicts of interest
- Competitor issues
- Other acts e.g. Health & Safety legislation
D&O cover is almost always written on a Claims Made basis, meaning that cover is triggered when a claim is made against the insured during the policy period, regardless of when the wrongful act took place.
How much cover will I need?
The level of cover you need depends on your business’s unique attributes and the risks you are likely to be exposed to. Howden will take the time to get to know your business to ensure your policy is tailor made to safeguard your business.
If you already purchase D&O, it is important to frequently assess your policy terms to ensure your limits are high enough to cover any legal actions against your directors and officers.
Speak to Howden today for a full review of your policy to ensure you are adequately covered and don’t have any hidden exclusions in your policy. You can count on our professional insurance advisors for the resources and specialist knowledge you need to purchase a new D&O policy or update your existing policy.
Your organisation’s senior leaders negotiate a contract with a business partner. However, your senior leaders misrepresent the company’s finances in order to secure the contract. When the business partner discovers this discrepancy, they take legal action against your senior leadership team.
This would qualify as a wrongful act on your D&O policy, resulting in reimbursement for any legal costs that arise from the incident.
Your company stores sensitive customer information on-site, but your senior leaders fail to enforce adequate cyber-security measures to protect this data. Consequently, a cyber-attack takes place, publicly exposing customers’ personal data. Numerous customers take legal action against your senior leaders for the damages that result from this security failing.
This would qualify as negligence on your D&O policy, providing cover for the cost of customers’ legal disputes related to the breach.
Breach of Health and Safety
An employee was injured at work and brought an employer’s liability claim against the company and the solicitor also included the director responsible for Health and Safety.
Your D&O policy would defend the officer and the costs involved in complying with the investigation by the Health and Safety Executive (HSE).
You’ll be covered if:
- An employee takes legal action against your senior leaders for unfair dismissal
- Your senior leaders negotiate a contract with a business partner however misrepresent the company’s finances to secure the contract
- You have a data-security breach due to your senior leaders failing to implement adequate cyber-security measures
- An employee takes legal action against the Health and Safety officer, after suffering a serious injury due to inappropriate health and safety training