Directors and Officers Liability Insurance
(Management Risk Insurance)
Essential protection for Company Directors
A Management Risks Insurance Policy is designed to protect Company Directors as well as Officers of a company against the defence costs of allegations made against them for an alleged wrongful act.
In many instances when an action is taken personally against a Director or Officer of a Company they have to respond to the claim personally, effectively putting all their personal assets at risk. Furthermore, a company may have Limited Liability but when it comes to action against a director or officer no such limit applies, any claim against you is therefore unlimited.
Management risks insurance policies are available to protect you and your business, it’s usually made up of a number of parts or policy sections, Directors & Officers Liability including Corporate Legal Liability or Entity Defence as it is commonly referred to and Employment Practices Liability Insurance for employment disputes.
Cover provided is Legal Defense costs for the individual Director or an Officer of your company, just defending a claim itself can become a long and drawn-out process the costs of which can be substantial.
What is covered under a Management Risks Insurance Policy
Directors & Officers Liability Insurance (D&O)
There are numerous examples of where a director can have a claim made against them, here are just a few
An investigation by HMRC
Health & Safety Executive (HSE) Investigations
Misrepresentation
Failure to comply with laws or regulations
Competitor Claims
Claims made by employees of Race, Sex, or Disability Discrimination
Insufficient controls on directors
Trading whilst insolvent
The claim might not go anywhere but the defence costs could be considerable.
Corporate Legal Liability (Entity Defence)
This covers the organisation or the Entity, not the director personally, that’s already covered in the above D&O. At Real Insurance we only provide policies that cover both the Directors & Officers Liability as well as the Ltd Entity itself.
Action can be taken against the individual director and the entity at the same time. Similarly, whilst action may be taken against the company, the CEO, the Chairman, or Director can be included in an action even though they may know nothing about an incident that has taken place.
Action against the entity can come from breaches of statutory duty, for instance, GDPR and the ICO. The HSE where someone has been injured, corporate manslaughter where cover would pay the cost of defending the charge*. Other areas might be defending cases of breach of contract or pollution. Pollution can be included as a standard within a Management Risks policy or as a stand-alone section as an option depending on the provider.
At Real Insurance we can provide options that best suit your business needs, speak to us, you will be speaking to insurance experts that are both knowledgeable and have been in the industry for many years. We are advice-driven so you are not left on your own, we can help with those difficult decisions about your personal and business protection.
Employment Practices Liability (Option)
Most businesses need employees, and for most of the time employees and management get on just fine, and as we constantly hear, “my employees are great” they would never make a claim against me or the business.
Until that is, they do!
An employee can bring an action for all types of things, Unfair Dismissal, Constructive Dismissal, Discrimination, and Misconduct are typical examples.
The cost to defend a claim can be substantial, not to mention the cost of any awards made against the business. The recent lifting of charges to make a claim has resulted in a “have a go” culture as it’s not going to cost anything and with conditional fee claims management companies the claimant has very little to lose.
The cost per hour for an Employment Law specialist to handle any claim does not come cheap, the single hourly cost may be much more than the cost of the insurance that is there to cover you.
Employment Practices Liability (EPL) provides the services of a specialist Employment Law Solicitor, it pays the legal costs and any awards made against the business.
*Policy coverage will not cover awards for criminal acts.
The cost of a management Risks policy is insignificant against the potential for personal liability and costs to a director or the company.
What types of cover can be found under a typical policy?
Of course, the legal defence costs are covered which is very important to you but what other covers might you typically expect to have protection for?
Directors & Officers Liability Insurance
Identity Defence Costs
Criminal Prosecution Defence costs
Pollution Defence costs
Asbestos Defence Cost
Public Relations costs
Corporate Legal Liability
In addition to covers provided under a D&O policy, an important cover is Defence Costs for Breach of Contract as well as Fidelity cover, Loss of Documents and Pension and Employee Benefits.
What is not covered under a management risks policy?
Like all insurance policies, it is important to understand what is not covered, criminal acts are a typical example. An incident may have been referred to the Health & Safety Executive, there may be obvious shortcomings that have resulted in injury to an employee.
It may be proven that a director was aware of circumstances that could have caused the injury but chose to do little about it, whilst the policy may respond to such a claim against the director, negligence of this type would become a criminal act and therefore whist defence may be provided that is where it would end.
Just like other insurance, Excesses can be applicable, sometimes these can be quite high and it’s important to make sure when you take out these types of insurance policy that you understand excesses, terms, and conditions. Excesses of £5,000, £10,000 or even higher for D&O and Corporate are typical, its vital that these amounts are understood.
Employment Practices Liability can have high excesses too for example £5,000 including defence costs.
At Real Insurance we have access to a wide Management Risks Market, many provide different covers that will apply to your business requirements, and some do not. Discuss with us what your director and business needs are we can tailor a policy that meets your requirements in cover and excesses.
Contact Us on 0330 058 0260
Why obtain your Directors and Officers insurance from Real?
When you speak to us, you will deal with one person, not multiple staff members who have to read your file every time you contact us. You will deal with knowledgeable and experienced commercial insurance people who have been in this industry for many years, many with twenty to thirty years each.
Call us today on 0330 058 0260
