How directors & officers insurance can benefit your business
IPA Insolvency Practitioner newsletter, August 2024
Article by Chris McLaughlin, Account Manager, Lockton.
Directors & Officers (D&O) insurance provides financial protection to directors, officers, and senior employees for claims or allegations against them alleging ‘wrongful acts’ which can include breach of trust or duty, neglect, error, omission, misstatement, or misleading statement.
Below, we offer a snapshot of what D&O insurance includes, and whether it might be right for your business.
What’s included in D&O cover?
Some of the features of a Directors & Officers policy can include cover for the costs of:
• Defending employment related wrongful acts
• Legal representation
• Claims for damages
• Judgements or settlements
• Defending the actions between directors of the same company
• Tax contributions due after a company has become insolvent and liability ensues
• Extradition proceedings
Various limits of cover are available from £100,000 to £1,000,000, and can often be added to policies as an optional extra. For businesses requiring a higher limit, a standalone D&O policy is recommended which can cater for limits upwards of £1m or £2m.
Are additional covers available?
Insurers typically offer the following additions alongside D&O insurance when purchasing a standalone policy:
Employment Practices Liability insurance
Employment Practices Liability (EPL) protects a company, their managers and employees against the financial risk resulting from employment related claims. Claims can arise from (but are not limited to) allegations of unfair dismissal, discrimination, negligence, harassment, emotional distress and coverage can include defence costs, fees, expenses & compensation awards. This type of cover is not restricted to the type of business and can be offered to a charity, limited company or not for profit organisation.
Corporate Legal Liability insurance
Corporate Legal Liability (CLL) provides cover for claims or allegations of corporate wrongful acts. Examples include allegations of mismanagement, corporate identity crime, a health and safety breach, employee dishonesty, or libel and slander. Coverage can include defence costs, investigation costs, and regulatory costs.
Is D&O insurance right for my business?
This will primarily depend on the size of your business, and the number of employees the business employs. A larger firm employing many employees will have a greater risk of claims, and therefore can expect to pay more for their insurance than a comparable smaller firm with fewer employees.
If you are a larger firm, it is prudent to consider a higher limit to ensure the appropriate cover is achieved.
To discuss D&O or other any insurances you may require, please contact Chris McLaughlin at chris.mclaughlin@lockton.com.
Please note that guest content does not necessarily represent the views of the IPA.