MC Employers' Guide: Directors' and Officers' Liability Insurance

Directors Table
In this MC Employers' Guide, Richard Gorst, Director of Mitchell Charlesworth Insurance Solutions looks in depth at Directors' and Officers' Liability Insurance; why you need it, what it is, the risks involved and the cover that is available for Directors:

The importance of your duties and responsibilities as a Director or Officer of a company has reached unprecedented levels, with legislation driving regulation and increasing the required levels of due diligence within the UK. As a Director or Officer you are responsible for the management decisions you take, and claims can be brought against you for so-called "wrongful acts" leading to your personal wealth being put at risk.

The Importance of Directors and Officers Liability Insurance:

•    There are a myriad of laws under which you as a Director could be held culpable including the Companies Acts, Data Protection Act 1998, Insolvency Act 2000, Employment Relations Act 1999, Environmental Protection Act 1990 and the Health and Safety at Work Act 1974.

•    Claims against you can be brought by an ever-widening group of people including: employees, customers, suppliers, creditors, bankers, regulatory groups and shareholders.

•    Issues leading to litigation are widespread: wrongful termination, discrimination, harassment, dishonesty, fraud, financial reporting and health and safety at work.

What is Directors and Officers Liability Insurance?

•    An insurance to indemnify you, as Directors and Officers, for claims against you including the legal costs and expenses incurred in the defence of a claim for wrongful acts performed solely by reason of you acting as a director or officer of a company.

•    In general, it may provide insurance cover for claims arising out of actual or alleged breach of trust, breach of duty, neglect, error, omission, misstatement, libel, slander, breach of warranty of authority and wrongful trading.

Where is the exposure?

•    Directors and officers act as agents for the company. However this does not mean you are exempt from liability; you are personally exposed to claims arising out of your activities.

•    Directors and officers have numerous obligations both at common law and also under statute. Some of these are strict liability offences under the Companies Acts or health and safety legislation.

Cover provided can include:

•    Employment practices claims (for harassment, discrimination, wrongful termination etc. including claims for emotional distress).

•    Libel and slander costs (including exemplary damages).

•    Pollution defence costs.

•    Legal expenses and costs regarding investigations into a company's affairs, even if there is no claim against a director or officer.

•    Advancement of defence costs.

Mitchell Charlesworth Insurance Solutions can help you to understand your exposure and arrange suitable insurance cover. For more information, please contact Richard Gorst on: 0151 423 7500.

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