Whether you are running a FTSE 100 listed company, or a small business with a relatively low profile, the need for adequate Directors and Officers Insurance (D&O) is the same.
Many directors and officers of private companies are not fully aware of the legal dangers that could potentially have a devastating effect on both their company and their personal standing.
An amendment to the Companies Act 2004 means that directors and officers of private companies carry a personal risk of financial ruin from actions brought against them.
In short, directors are constantly at risk of being sued by employees, regulators, shareholders and creditors. They can even be sued during their retirement.
At Hine, we can arrange tailor made D&O insurance to protect your company and its senior figures against a wide range of potential legal attacks.
What claims could you face?
The directors of most companies and organisations can be held personally liable for the actions they take in their day to day business.
The claims that can be generated by an aggrieved party include:
- Broken Agreement (e.g. with supplier)
- DTI investigation
- Health & Safety breach (e.g. HSE prosecution)
- Sale Transfer (e.g. Overvaluing the company)
- Slander
- Unfair Dismissal
- Sexual Harassment (e.g. an employee accusing a director).
When a claim is made against an individual director or officer, they are normally required to meet their own defence costs and pay the settlement – if they are found to be at fault. However, the right D&O cover is able to protect the financial assets of the directors and officers by transferring the risk off the balance sheet.
How to avoid claims arising
Although specific claims made against individual directors will involve a unique set of circumstances, there are some general areas in which directors are urged to be vigilant.
For example…
Health & Safety
The HSE is increasingly keen to prosecute companies and its directors and officers where they suspect a lack of proper health and safety procedures. Some HSE investigations can involve focusing on the actions of a manager responsible for health and safety in the work place. Therefore, lines of responsibility should always be clear and full training must be given to those who are legally answerable for the company having proper health and safety procedures in place.
DTI Investigations
Defending spurious allegations and maintaining the reputation of directors can be difficult. One of the benefits of good D&O cover is it will fund legal costs and allow the company and individuals to take decisive action to clear their name.
Slander
In some industries, commenting on your competitors or customers may be an essential part of the public role of directors. However, comments must be measured as allegations of libel and slander are usually generated by parties who have a lot to gain from the demise of an individual director, and they can be expensive. Without adequate D&O cover, directors and officers can be faced with a sizeable personal bill.
Sale of a company
Directors should note that even when using external advisers it remains the sole duty and responsibility of directors to provide accurate information during the sale of their company.
Broken agreement
When a company goes into receivership its directors may face claims and allegations from a number of sources including creditors. A D&O policy is needed during these stages and should not be cancelled upon receivership, because it may be needed to protect directors from these allegations.
Trust Hine to provide your D&O cover
Hine is able to arrange essential D&O protection for the directors and officers of your company and provide wide ranging, flexible cover that can be tailored to your business.
For more details contact us today.
