Why buy D&O?
Directors’ personal liabilities are unlimited and in the course of carrying out everyday duties for a company, directors are exposing themselves personally to lawsuits, investigations and criminal prosecutions. Without insurance, directors can end up having to re-mortgage (or worse), just to pay legal fees.
When a director needs to defend lawsuits, investigations and prosecutions, being able to access a specialist insurer’s services and have insurance to cover the cost of using the right law firms is going to help achieve the best possible outcome.
There are an increasing number of government bodies that can investigate a company – the DTI’s Companies Investigations Branch, the Health & Safety Executive (HSE), the Serious Fraud Office, the Disability Rights Commission just to name a few. Even when there is no initial allegation that a director has done anything wrong, having the ability to obtain legal representation at these investigations enables directors to gain the best possible outcome.
In one year
- Over 1,500 directors were disqualified for between 2 and 15 years.
- The DTI’s Companies Investigation Branch looked at almost 5,000 companies.
- The HSE issued over 11,000 notices and prosecuted 982 cases.
(Source: DTI’s annual publication on Companies).
Although D&O insurance policies for large companies can cost large sums, we can provide D&O cover for small and medium size enterprises at highly realistic and affordable premium levels.
Claims Scenarios
A director of a UK company was sued by one of his distributors. It was alleged that he had deliberately breached an exclusive distribution agreement and that he had used commercially sensitive information within this agreement for personal benefit. Eventually the distributor dropped the case, but not before the insurers had funded some £200,000 of defence costs.
A director was sued by a group of his shareholders for negligence after the company’s fortunes declined rapidly. After consultation with lawyers, it was decided that the best course of action was to settle out of court. The D&O insurance funded the final settlement as well as the legal costs. The sums involved would have been sufficient to personally bankrupt the director in question.
An HSE investigation into a fatality at work turned into a full-blown public enquiry which the Director was required to attend. The policy funded his legal representation at the enquiry and enabled him to demonstrate that the fatality had not arisen out of any negligence or wrongful act on his part.
