Directors & Officers’ Insurance

Competitive insurance quotations for directors and officers insurance

What does  Directors and Officers Liability cover include?

Directors and Officers Liability can include cover for personal protections for the directors of the company, ofiicers and senior employees. It can include claims from shareholders, prosecution by regulatory agencies and allegations of wrongful trading.

We recommend that the directors of all limited companies consider this cover carefully if they wish to protect themselves and their personal assets.

Contrary to popular belief being a ‘limited company’ does not limit the possible liabilities of  Company Directors or Officers who can be personally sued both at civil law and under the raft of legislation that now applies to businesses.

Company Directors could face legal action from shareholders, employees, fellow directors, regulatory bodies, customers, crown prosecution service, the general public, inland revenue, suppliers & competitors.

This leaves their personal assets at risk.

Under the Companies (Audit Investigations & Community Enterprise) Bill companies are now permitted to :-
•    Indemnify directors in respect of proceedings brought by third parties
•    Pay Directors defence costs as incurred

To achieve this you must ensure that you amend your Memorandum of Association to take account of this.

The Directors and Officers policy covers:-

•    Legal Costs in defending criminal actions
•    Legal Costs and Compensation awarded in respect of civil actions.

We are delighted to advise Broker Network have negotiated a block scheme with insurers for all member brokers, which means that this essential cover is now much more affordable for all our customers

These discounted rates mean that premiums now start at £150 per year plus insurance premium tax (depending on the turnover of the company)

We recommend the maximum indemnity limit you can afford bearing in mind that actions can be taken against all directors with the indemnity limit being used up on a ‘first come, first served’ basis.

We attach a document prepared by Chartis Insurance, 'SME’s 10 Reasons to buy Directors & Officers Liability Insurance’ outlining some of the issues which are relevant to this area, together with some claims examples, prepared by Markel Insurance.

The decision as to whether or not you purchase this cover should be a decision made by the board of directors as a whole.

Some Directors and Officers Liability Policies includes Corporate Liability cover - what does this cover?
This can provide protection for claims made against your company for financial loss.  This could include claims from business partners or competitors or prosecutions by regulatory agencies.

Directors and Officers Claims examples provided by Markel Insurance:-

Engineers.
Engineering manufacturers entered into a factoring agreement with the claimant, but following the company going into administration, alleged that they used the monies due to the claimant to pay other creditors.
Director Personally Sued £300,000

Property Owners.
Director of a property owning company breached his authority in appointing a company belonging to an employee to undertake work on their behalf.
Proceedings issued by the claimant for non-payment of fees of £42,000 following cancellation of the contract.

Clothing Manufacturer.
Directors of a clothing manufacturers facing disqualification proceedings issued by the Secretary of State for trading whilst insolvent, together with allegations that they failed to maintain their accounts in a satisfactory manner to enable the receivers to carry out their duties, leaving many creditors (including HM Customs and Excise) unpaid.
£56,000 paid in defending the directors named in the proceedings

Cutlery and Giftware Manufacturer. 
Contractual dispute following appointment of a website developer to design an online trading website for a giftware manufacturer. The director concerned was not authorized to enter into the contract and the company cancelled the agreement.
Website developers claimed against the director for their costs incurred to date of £48,000

Glazing Company.
Director of a glazing manufacturers named personally in an unfair dismissal claim form a former employee.
Costs incurred of £14,055 in defending the director.

Waste Management Company. 
Transport manager of a waste management company prosecuted by the Crown Prosecution Service following an accident involving an unroadworthy vehicle operated by the company.
Claims reserve £15,000

Distribution company. 
Claim for unfair and constructive dismissal against the Finance Director of a distribution company by a former employee alleging sexual harassment and other inappropriate activity (sending text messages out of working hours, inviting her on nights out etc).
Costs £21,000

Shipping Agents.
Shipping agents were required to hold all goods held on behalf of the claimant in a separate account, but following their liquidation, it was discovered that this was not the case, and the claimants would have to recover their goods as a normal creditor.
Directors sued for £61,000.

Makers of timber products. 
HSE prosecution following serious injuries suffered by a machine operator in clearing a blockage in a stamping machine. There should have been a safety cut out stopping the machine operating with the access panel open, but this had been broken or disconnected.
Defence costs incurred of £25,700

Manufacturing Company. 
Action against directors of a manufacturing company by the Health and Safety Executive following their refusal to respond to a notice to control dust emissions. Directors responsible had failed to adhere to deadlines so action taken against both the company and the directors responsible.
Incurred over £110,000 in defence costs, with a further £60,000 outstanding

Glass Manufacturers.
Action taken against the directors of a glass manufacturing company by Trading Standards following allegations of pre-stamping of safety glass before it had passed the necessary testing procedure.
Costs incurred £25,718

10 Reasons to Buy Directors and Officers Liability Insurance - as recommended by Chartis Insurance Company:-

1. Director Disqualification
Disqualification orders are from 2 to 15 years.  Even after the ban the stigma remains: credit history and personal reputation are permanently damaged. Directors & Officers cover is designed to pay for the legal defence costs as and when they are incurred.  Specialist Directors and Officers Insurers understand the legal processes, and have experienced and tenacious claims teams.  It’s good to have the strong and tough claim teams in your corner when facing such a crisis.

2. Investigations
It’s very easy to complain about a company.  The DTI’s Companies Investigations Branch considered complaints against almost 5000 companies last year.  The Financial risks of investigations are considerable – insurers pay out more for investigations in the UK than anything else under Directors & Officers cover.

3. Personal Liability
Directors personal assets, their houses, savings and pension funds, are at risk, whether they have acted deliberately, negligently or innocently.  Mistakes can be very costly.  Directors & Officers Insurance is not designed to cover dishonest or fraudulent acts, but there are plenty of examples of directors found personally liable when they haven’t been dishonest, deliberate or fraudulent – just failing to take sufficient care – in which case awards and defence costs would be covered.

4. Criminal Liability
Directors could go to prison, for their actions, inaction or ignorance. The very best defence can be invaluable, but very costly.  Directors & Officers Insurance cannot cover the criminal penalties – that is against public policy – but it can cover the costs of defending a claim up until the point guilt is established.

5. The SME Set-up
Fast, flexible and energetic but often with little risk management infrastructure (in house legal, risk managers or compliance managers) and few formal control processes. Sooner or later, some businesses are going to make expensive and very time-consuming mistakes.  D & O insurance covers the individual director’s defence costs and employment tribunal costs as well as the associated awards.  Specialist D & O insurance can also cover the company as well. Employment Tribunals are full-blown legal hearings, are expensive and can last for months, and damages awarded are often considerable.

6. Family Companies
Family run businesses, which make up a large proportion of UK businesses, carry with them exposures for the individuals concerned.  Family companies can be a hotbed of dispute – internally and externally.

7. Partnerships
Partnerships can be particularly vulnerable to the problems of employment-related claims.  Whilst they are not governed by Companies Act legislation they are still subject to the raft of employment legislation and scrutiny by bodies such as the Equal Opportunities Commission, the Commission for Racial Equality and the Disability  Rights Commission. Chartis Insurance has developed specific insurance packages for the management liabilities of partners at their work place, and on the board of other companies.

8. Unfounded, Mischievous and Scurrilous Allegations
Directors can face allegations, unfounded or otherwise, which they will be forced to defend, and even unfounded allegations can be extremely expensive, time-consuming and stressful.  The very presence of Directors & Officers cover can be a huge relief at such times.

9. Past Present and Future
Actions can (and do) follow directors from job to job.  Actions cost money and can be very stressful on both the director and his family.  Retirement offers no escape, nor does death, as directors’ estates can be pursued.  Directors & Officers insurance covers past directors and the state.  Even when the policy is no longer in force, D & O insurance can cover directors for a run off period following retirement, as long as the Directors & Officers insurance was in place at the time of the alleged incident.

10. Inadequate Cover? Legal Expenses Versus Directors & Officers Insurance
Legal Expenses policy limits are much lower (e.g. £50,000, £75,000, £100,000) which is inadequate for larger protracted actions.  Legal Expenses insurance only responds when an insured has reasonable prospects of success.  It’s precisely because directors’ might well lose an action that Directors & Officers insurance is so essential (to fund defence costs or settlements).  Faced with a career and lifestyle-changing crisis they will not want to rely on legal expenses policy that will only cover them if they are likely to win.

Why choose L. F. E. Insurance Services Ltd for your directors and officers liability Insurance?

• Independent impartial advice and quotations on your directors and officers insurance
• Cover can be tailored to your individual needs
• Monthly payment facility
• Independent advice and help on you claims

Ring Adrian today on 0116 284 6097 for independent impartial insurance advice and a quotation on your directors and officers insurance requirements

or

For  a bespoke directors and officers or corporate liability quotation or a general enquiry, click here.

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