Directors' & Officers' Liability Insurance (D&O)

Directors’ and Officers’ Liability Insurance – also known as D&O insurance – covers the cost of compensation claims made against your business’s directors and key managers (officers) for alleged wrongful acts.

Wrongful acts include:

• Breach of trust
• Breach of duty
• Neglect
• Error
• Misleading statements
• Wrongful trading
• Employment practices & HR issues
• Shareholder actions
• Reporting errors
• Inaccurate or inadequate disclosure (e.g. in company accounts)
• Misrepresentation in a prospectus
• Decisions exceeding the authority granted to a company officer
• Failure to comply with regulations or law

Does my Company need it?

If your company has directors or key managers, Directors’ and Officers’ liability insurance can cover the cost of compensation claims made against them by shareholders, investors, employees, regulators or third parties.

Directors and officers have specific duties, responsibilities and powers relating to their positions. These are usually set out in their job description or terms of reference. If a director or officer of your company is found to have acted outside of their terms of reference, civil, criminal or regulatory proceedings can be brought against them.

Directors’ and Officers’ liability insurance covers the cost of defending these proceedings, as well as any compensation costs that arise from an unsuccessful defense.

If directors and officers do not have insurance, they face a greater risk of not being able to defend themselves against:

• Disqualification from holding the position of director
• Civil proceedings which can lead to hefty legal costs and awards for damages
• Criminal prosecution which can lead to fines and possible imprisonment

What it covers

Directors’ and Officers’ liability covers claims made by:

• Regulators, e.g. investigations by Government Departments and Boards, shareholders or investors, e.g. for failure to act in the company’s best interest
• Creditors

It also covers claims brought in relation to:

• Breach of European legislation
• Insolvency

Employment practices liability insurance can be bought as an extension of directors’ and officers’ liability insurance. It covers employee discrimination claims, e.g. for unfair dismissal, harassment, or failure to promote a person.

Directors’ and officers’ liability sometimes covers defense costs arising from criminal and regulatory investigations into your company where no actual wrongful act has been alleged against a director.

What is not covered

Directors’ and officers’ liability does not cover claims made against your organization as a whole, only those made against individuals for alleged wrongful acts carried out in their capacity as directors or officers.

• Fraud
• Intentional non-compliant acts
• Illegal remuneration or personal profit
• Property damage and bodily harm (except Corporate Manslaughter)
• Legal action already taken when the policy begins
• Claims made under a previous policy
• Claims covered by other insurance