As an owner, director, or officer of a company, you’re at the top of your game. You are likely faced with a multitude of decisions every day in the course of your work, but if someone thinks you’ve erred in your judgement, they can sue you as an individual. That means you could face criminal charges, and your personal finances may be at stake.
Whatever your business, whether big or small, you are at risk of claims. And although your judgements may be perfectly sound, it’s a good idea to take out directors insurance, particularly for high-ranking officials, as you face the most risk from your decisions.
KEY DECISIONS – UNDERSTANDING YOUR LIABILITIES
With power comes responsibility. Unfortunately, there are many ways you could be held responsible for your actions if you break, or are alleged to have broken, one of the many laws governing the work environment. This might be a breach of health and safety, an accounting irregularity, or an employment related claim.
The following risk scenarios are common claims that directors and officers (D&O) insurance can help to protect against:
- Breaches of fiduciary duties
- Shareholder allegations of mismanagement
- Inaccurate financial reporting
- Inadequate disclosure
- Misrepresentation or omission during fundraising
Essentially, if an employee, shareholder, client, or competitor believes you are guilty of an error, have neglected your duty, or made a misleading statement, they could sue you. Without directors and officers insurance, your personal assets could be at risk in the ensuing lawsuit.
WHAT PROTECTION DOES D&O INSURANCE OFFER?
Taking out directors and officers insurance helps mitigate financial losses from legal defence costs, settlements, or judgments arising from claims. It covers the costs involved and ensures that your personal finances are not impacted. Like most insurance, your policy will cover an agreed amount, and any excess will be paid by you.
In many cases, directors and officers insurance is taken out by a company to protect its leadership team. This safeguards the company’s financial health by covering any expenses related to defending executives and board members, but it can also help to attract top talent.
Companies without sufficient D&O insurance may be less able to employ and retain qualified executives, as it provides potential hires with assurances that they won’t face significant personal financial exposure for carrying out their corporate duties. If your company has directors insurance, or you think you are covered by a company policy, remember to read the details carefully to ensure you are properly covered. If not, you may need to take out a personal policy for peace of mind.
WHAT TYPE OF INSURANCE DO I NEED?
To ensure you have appropriate coverage for your role, there are several types of policy you may want to investigate including directors and officers insurance, professional indemnity, and employment practices liability insurance.
Sometimes these are all offered as part of a D&O package, but often they are separate policies. So, how do they differ and what’s covered? Below, we explain how each type of policy measures up:
- Directors and Officers Insurance protects company directors and officers from personal liability arising from decisions or actions made in their leadership roles. It covers legal defence costs, settlements, and damages for claims like mismanagement or breach of duty.
- Professional Indemnity Insurance, also known as Errors & Omissions (E&O) insurance, covers professionals against claims for financial losses due to mistakes, negligence, or inadequate service in their professional duties.
- Employment Practices Liability Insurance (EPLI) protects against claims made by employees regarding workplace violations. Coverage typically extends to allegations involving hiring practices, failure to promote, breach of employment contracts, infliction of emotional distress, or wrongful discipline.
TAILOR YOUR D&O COVERAGE
Without liability insurance, you could face proceedings that result in legal costs and awards for damages that reach an eye watering sum – all payable by you.
OBF can reduce your exposure by providing tailored directors and officers insurance, customised to your specific needs. Whether you’re looking for an individual policy, or a company-wide solution to protect your managerial team, we’re here to help.
With over 50 years’ experience in specialist insurance, we understand how to protect those in leadership positions across a variety of industries. So you can get back to doing what you do best, focus on your business, and lead with confidence.
