The role of Company Director of a Limited Company brings with it serious legal and regulatory responsibilities. Whilst the limited status of a company limits the financial exposure of shareholders in the event of insolvency, Directors have unlimited personal liability in lawsuits brought against them in civil courts, and can be subject to criminal prosecution; company Directors can and regularly do face civil and criminal actions and can lose their homes and savings as a result of prosecution or damages awards.
Fortunately, this exposure has resulted in the development of “Directors and Officers” insurance. This is sometimes called “Management Liability” and provides broad cover for civil fines and legal defence costs:
- Covers Directors against personal lawsuits in civil courts –defence costs and any damages awarded.
- Covers Directors against any personal criminal defence costs (but not any fines or penalties imposed).
- Can be extended to cover Directors, Officers and “entity” for employment disputes
‘Wrongful Acts’ include but are not limited to, actual or alleged breaches of trust or duty, neglect, error or breach of authority.
Employment Law Protection provides cover for your legal liability following an employment dispute, legal costs and expenses. Some Insurers can provide HR Expertise for the creation of your employment documents.
There are a number of factors that will help determine your insurance premium. These will include the limit you choose, the industry your business operations within and your financial performance over the past three years. After assessing your information your premium will then be calculated.
Consideration for Not-for-Profits
Many not-for-profit organisations with directors and officers often report some difficulty in affording the cost of D&O insurance. To minimise the costs, brokers should recommend choosing only those policy provisions considered most critical. For example, a volunteer-run not for profit without paid staff may skip employment practices cover until it hires staff. To defray the cost of premiums, some not-for-profit organisations consider charging board members a portion of the policy cost.
If you’re unsure if you need Directors and Officers Insurance or have any questions, please don’t hesitate to get in touch with a member of our team on 01925 989641 or complete our quote form and a member of our team will be in touch with you shortly.