In the past, you may have heard us talk about Directors & Officers Liability Insurance, often referred to as D&O.
D&O policies offer financial protection to directors and officers of companies against claims made against them in their personal capacity as directors or officers of a company. “Officer” is an unusual term but it refers to those individuals working on rather than in the business. So, for example, a Company Secretary would be acting as an officer.
Claims against individual directors and officers are quite rare but when they happen the consequences can be catastrophic. In many circumstances the various Companies Acts preclude the company from indemnifying an individual and so the target of any such action is faced with legal costs even if the claim against them has little merit.
Claims against directors can flow from employees, creditors, investors and regulators amongst others. We have seen directors attacked by regulators: the HSE favour prosecuting individuals in addition to the company where death of serious injuries at work have occurred. (Your D&O policy cannot pay a fine or go to jail on your behalf but the policy will pay the legal costs of defending or representing you).
D&O policies are arranged and paid for by the company and whilst the purpose of the policy is to protect its individual directors and officers, HMRC accept that such polices are not a “benefit in kind”.
D&O isn’t compulsory. Nor does it materially over-lap or replicate any other liability policies that a company may have, Employers and Public Liability policies for example. These latter policies protect the limited entity that is the company rather than its directors and officers.
Insurers’ now refer to D&O policies as “Management Liability” policies, simply because these policies often provide other cover extensions that are both for the benefit of individuals and the company. For example, our favoured provider includes protection against employment claims, unfair dismissal and the like and does so free of any policy excess in circumstances where we provide the HR advice. All of which makes these policies great value for money.
We sometimes hear people say:
“As a director, my liability is limited”
“I don’t have the word director in my title, so I can’t be held liable”
“We are only a small company, nothing will happen to us”
“My personal assets are safe”
If you would like to speak to us about this type of policy for your business in greater detail, or would like to get a quotation, please contact us on either 01302 341 344 or 0114 243 9914 today.
By Leah Kendall – Account Executive.