Directors and Officers Insurance

As a director of your company you have an exposure. The belief that being a limited company completely protects you is unfortunately a myth. The reality is somewhat different and someone can pursue you just as easily as the company. The problem is that whereas your company has limited liability, you do not, and therefore your personal assets are at risk. A Directors and Officers policy protects your personal assets and will defend actions brought against you.

The main reason clients give for not seeing the need for Directors & Officers Insurance is that as they carry out procedures correctly, there will be no claim. Yes, you may do everything correctly but that will not stop someone trying it on if you have grieved them in some way, whether it be a disgruntled employee or an annoyed competitor. The claim itself may well be successfully defended but not before you have spent lots of money defending the action which 99 times out of 100 you will not be able to recover back.

A Directors & Officers policy will pay for these defence costs and civil compensation should the claim be awarded against you. If the action is a punitive one, the policy will still pay the costs to defend you. Furthermore insurers can now also quote for Corporate Liability (covers the company) and Employment Practices disputes. Most insurers will now also include some fidelity cover free of charge.

If you have a Commercial Legal Expenses policy, you may find that some of the cover under the Directors and Officers policy is duplicated. However, please note that a Commercial Legal Expenses policy will normally carry a 51% rule, which means that the insurer will not deal with the claim if there is more chance that they will lose. A Directors & Officers policy does not have that rule so even if there is only a 1% chance of success the policy will still activate.