Guide to Business Insurance (Series) - Directors' and Officers' Liability Insurance

As a company director, you have a certain set of responsibilities – all of which are influenced by your duty to act in your company’s best interests.

So, what happens when something goes wrong?

This is where Directors’ and Officers’ Liability Insurance comes into play. It is there to protect you should the ‘unlikely’ situation arise – provided you weren’t acting deliberately against your company’s best interests.

If you are in said scenario, where you have made a sincere decision only to be met with negative outcomes, the protection is given by your Directors’ and Officers’ Liability Insurance could assist you in any lawsuit that may incur.

So, why would you require Directors’ and Officers’ Liability Insurance?

Good question, let’s answer it with more questions.

• Are you an individual who is wanting to protect their personal interests?
• Would you like to pay for the legal fees surrounding investigations or accusations?
• Do you believe ‘Limited Liability’ is enough to protect you from personal claims?
• Do you like safety nets?

If you answered 4/4, then this policy might be for you.

Essentially, D&O Insurance is to cover financial outgoings – think legal costs for defending against an accusation or investigation. It serves as a fantastic safety net, which unlike ‘Limited Liability’, serves your own interests as an individual.

What does it cover?

You’ll find D&O Insurance covers more or less every bad thing you can be accused of. Within the list, you’ll find it protects against:

• Non-deliberate acts committed by officers or directors that are in any way illegal or outside a company’s best interests.
• Breaches of any kind of legislation
• Financial mismanagement
• Abuses of power
• Accusations of libel or slander
• Harassment and discrimination claims
• Disputes relating to acquisitions or mergers.

As you can see it’s a pretty handy shield to have under your belt.

Where could a claim come from and how could D&O Insurance help me?

To help put this insurance policy into perspective for your business, here are a couple of instances where a claim against an individual could arise from:

• An example of where D&O Insurance would protect you could be if you are under investigation. Investigations are becoming increasingly commonplace and even if the results are in your favour the cost of the investigation – i.e. court sessions, legal expenses – should you not be covered by D&O Insurance could surprise you.
• Another example could come from your employees. Should an employee feel wrongfully treated, a direct claim of harassment or discrimination against yourself could result in more financial outgoings. Again, D&O Insurance policies can help against this.
• One more scenario could come from investors or shareholders who feel the company’s stock value or profitability has been harmed in some way. Let’s say you made a strategical decision to pull out of a market you saw as unprofitable only for the said market to then rise in value, you may be seen as accountable and in turn face a lawsuit.