Why do you need Directors and Officers Liability Insurance
Even without a deemed negligent act, a personal legal defence bill can reach costs of £50,000 upwards. Would you be able to pay this from your own pocket?
What is Directors and Officers Insurance?
Directors and Officers Insurance provides cover against the company’s legal liability arising from actual or alleged wrongful acts of all and officers of the company in their capacities, including the defence costs.
Does limited liability status protect me from being sued?
It is a common myth is that limited liability status protects directors from being sued personally. It offers no protection; directors are personally liable to defend claims. In some circumstances, directors may face unlimited personal liability.
If a director is sued whilst acting on behalf of a company, they will generally have to fund their defence personally and are unlikely to recover such costs unless they successfully defend the claim.
Who is typically affected by liability claims?
It’s another common misconception that claims are just brought against directors of larger, usually public companies. The reality is that whatever the size of the company with which you are involved, the potential of liability is there.
Legislative changes in recent years have meant Directors and Officers Insurance is becoming an important purchase for smaller companies wishing to protect themselves against:
- The Corporate Manslaughter Act 2010
- The Health and Safety (Offences) Act 2008
- The Companies Act 2006
These, along with employment law changes, and Health and Safety obligations continue to change, leaving your current protection vulnerable if you fail to revise it regularly.
The Companies Act places statutory obligations on over 200 areas of liability upon Directors and Company Officers, such as ensuring the safety of employees, as well as extending shareholders’ rights to sue Directors.
Who can raise a liability claim against directors and officers?
Potential claimants can include employees, your company, creditors, customers, regulators, competitors or anyone who feels that they have suffered a loss resulting from a director or company officer acting incorrectly. This may be through mismanagement, negligence, unfair dismissal or discrimination, health and safety breaches, anti-competitive behaviour and so on.
It is worth considering that you don’t have to have acted wrongly to be personally sued. Even if the claim is not legitimate, you would still have to foot the cost to defend it. With Directors and Officers cover in place, you’re protected against both actual and alleged actions.
Directors and Officers Liability Insurance can give you peace of mind by indemnifying you personally against defence costs it’s quick and straightforward to arrange. It is purchased by the company and should be considered an important part of every limited company’s insurance portfolio. To get your cover in place, give the team at Cool Cover a call on 0207 101 4941.
