While many small businesses put the necessary insurance in place for their premises, contents and vehicles, few consider protection for the company’s most important asset — you and your fellow Directors.
An increasingly litigious environment and the advent of the “no win, no fee” concept means claimants are more willing and able to take action and pursue claims. The consequences for company directors and officers can be devastating. A company is five times more likely to be called before an employment tribunal than suffer fire.
Why is Directors’ and Officers’ liability insurance needed?
Even in a company with limited liability status, directors and officers have unlimited personal liability. This means that personal wealth is at risk and it is the company’s responsibility to protect them.
Allegations, even if they’re unfounded, need to be investigated and defended, which comes with a cost. In the course of carrying out everyday duties for a company, directors and officers can be exposing themselves personally to lawsuits, investigations and criminal prosecutions. Without adequate insurance, they can end up having to re-mortgage – or worse, be forced to sell their house and other assets – to pay costly legal fees. That’s why arranging Directors’ and officers’ liability insurance – D&O for short – is now more important than ever.
D&O insurance covers the legal costs of “fighting your corner” against any allegations of wrongdoing in running the company. It provides a pot of money that can be used to fund defence and settlement costs and to pay for the cost of legal representation at investigations.
Directors and Officers are vulnerable on all sides:
- Health & Safety legislation – any Government body can take action or launch an investigation, particularly if the alleged breach relates to a serious injury or even a fatality.
- Shareholders – even happy, family run operations can become divisive, particularly under pressure, and shareholders, including fellow Directors, can pursue claims.
- Employees – if an aggrieved employee pursues an employment dispute, they can also sue a Director individually.
- Creditors – companies and individuals are loath to write off debts.
- Buying and selling companies – either of these activities will increase your personal exposure.
An employee was dismissed for gross misconduct after a violent altercation at work. The company Disciplinary Committee judged he had brought the company into disrepute – a decision was in line with the rules and procedures set out in the company handbook. The employee brought an unsuccessful claim for unfair dismissal and legal costs of £7,900 were paid under the D&O policy.
Let C&M Insurance take care of you and your fellow directors
C&M Insurance is an experienced independent broker with extensive experience arranging the right level of D&O insurance for businesses of all sizes, operating in a broad range of industry sectors.
We believe you’ve got more important things to think about than insurance, so let us assess your needs and your liabilities, and take care of the detail for you.