Director and Officers

The key areas of cover are:

Directors Personal Liability Coverage

– this covers the individual for civil and criminal defence costs and certain covered losses that are not indemnified by their company. Corporate Reimbursement Coverage can reimburse the company where it has indemnified its Directors.

Corporate Liability or Entity cover

– this protection operates where claims are made against the company rather than individuals.

Employment Practices Liability (EPL)

- Employment practices such as unfair dismissal, age, sex, disability, and race discrimination is the area that most claims under D&O policies arise

How can I buy D&O cover?

Claims costs average between £50,000 and £60,000 and are most likely to be made under the EPL section. This means D&O cover should be automatically included in the portfolio for any limited company.
If you can satisfy the “Usual Criteria” list below, Drayton Reed can provide you with quotes and put cover in place very quickly.
We will need to know your trade and the sales figure from your last complete financial year.
If your company falls outside the “Usual Criteria” we can usually still provide cover but we will have to negotiate with insurers and that will take a little longer.
Call us on 01243 887770 or email mail@draytonreed.co.uk

Do I have the right cover?

Before taking a board position, an important decision for any Director is to establish whether or not Directors and Officers Insurance is in place and, if so, the extent of coverage. Whilst many new Directors may question the existence of a Directors and Officers policy, few will establish whether the insurance is actually covering them and their employer for the risks they face.

Why do I need a policy?

There are over 200 offences in the Companies Act for which a Director can face claims, many of which are criminal prosecutions. It is public policy for the Health and Safety Executive to prosecute individuals where they feel there has been neglect of duty and poor management. For example, where management have been told about a potentially dangerous situation but did not address it before someone was hurt or even killed. A Director does not have to directly cause an accident to be responsible for it.

Why are Directors vulnerable?

• Employees increasingly understand their employment rights and are therefore likely to sue.
• Legal liability is shifting away from companies and towards personal liability.
• Regulators are more proactive in investigating companies.

What is a wrongful act?

A wrongful act could be a breach of duty, breach of trust, error, neglect, wrongful trading or a misleading statement, committed or attempted by a Director or Officer whilst acting in this capacity on behalf of the company.

The Corporate Manslaughter Act

The law allows for the prosecution of individual Directors but the Corporate Manslaughter Act means that if a company is convicted of corporate manslaughter could face an unlimited fine. Almost all companies, irrespective of their size, will be subject to scrutiny by Police and Health and Safety Executive if a workplace death occurs. If a prosecution be brought, a jury may consider anything it feels relevant, including what it considers being the ‘attitude’ of the company towards safety.

Where do claims come from?

Employee claims - unfair dismissal, negligent evaluation, failure to promote, harassment or discrimination.

Regulators - companies face investigation from legal bodies such as the Health & Safety Executive and Department of Trade & Industry and other industry specific regulators. The associated costs can be significant even if no wrongdoing is proven.

Shareholders - following some high profile claims, shareholders now scrutinise the activities of Directors more closely and there are more requirements for transparency of Directors’ decisions.

European legislation - it is the responsibility of Directors and Officers to ensure their company does not breach any European legislation, but with diverse responsibilities it is difficult to stay up to date on the latest directives.

Creditors/insolvency claims - these types of claims are being brought more frequently, and Directors and Officers are often singled out for such claims.

Case Studies

These are real life examples of claims where Directors and Officers insurance has paid out:

1. £45,000 – HSE visited a construction site after a near miss.
Although no one was injured, the costs for actions brought against the directors for several breaches that were revealed by the visit cost £45,000.
2. £121,000 – Directors questioned over road accident fatality
The directors and officers liability policy paid to defend two directors following a fatal accident. Defence and legal expert’s cost exceeded £121,000
3. £7,900 – Unfair dismissal claim
An employee was dismissed for gross misconduct after a violent altercation at work. The company Disciplinary Committee judged he had brought the company into disrepute and their decision was in line with the rules and procedures set out in the company handbook. The employee brought an unsuccessful claim for unfair dismissal and legal costs of £7,900 were paid under the Directors and Officers insurance policy.

“Usual Criteria”

No claims, losses or circumstances that might give rise to a claim
Shares are privately held
Company established more than 12 months
Latest financial statement shows a profit before tax and are not qualified
No mergers or acquisitions recently made or planned
All turnover is generated in UK or other EU member states
A statement of fact will be generated with all quotations and should be checked carefully to ensure it is totally accurate for your company and employees