Many people mistakenly believe that as a director of a limited company, they have no personal liability in regard to their corporate actions.
The truth is that while most corporate bodies are protected through public liability and other insurances, the individuals within the company are often unprotected: particularly where they have acted without proper authority or breached any part of the Companies Act, however inadvertently.
Why does your company need directors and officers insurance?
Broadly speaking, personal claims or proceedings against directors or officers can arise from any decision made, or act carried out, in the workplace however innocuous it may have seemed at the time.
These range from frivolous and occasionally malicious claims made by disgruntled customers who weren’t happy about the service they received, all the way through to official investigations. Claims and proceedings where personal liability can be involved also typically include:
Claims by investors and shareholders who blame directors personally for their losses
Actions brought by liquidators, where they suspect wrongful trading or incorrect payments to creditors
Actions brought by HMRC where insolvent trading or misappropriation of tax payments is suspected
HSE investigations where negligence is suspected
Police and SFO investigations where fraud is suspected
The importance of personal protection for all officers
It is important to note that while the legal definition of a director is reasonably clear, the legal definition of an officer is vague enough to allow claims or proceedings to be issued against people in almost any managerial or supervisory position.
So while you may be confident that all of your company’s directors are aware of their legal responsibilities, it is vital to understand that problems can be caused inadvertently by individuals at many levels of an organisation.
The practical benefits of directors and officers insurance
Our directors and officers insurance ensures that in the first instance you have direct access to practical advice from our in-house claims team. If you talk to them at the first hint of trouble, they can often help you to defuse the situation; either minimising the risk of a frivolous claim being made, or by helping you to direct claims or proceedings towards the company rather than individual directors or officers.
However, should proceedings still arise, our directors and officers insurance covers a wide range of scenarios: from the legal costs and damages where actionable mistakes have been made, through to arranging and paying for legal representation throughout lengthy and expensive official investigations. We can even arrange legal representation at a Police Station in the unfortunate event of a director or officer’s arrest.
In short, the protection given to directors and officers by limited company status is often less valuable than you may think. So if you don’t already have D & O insurance, it is well worth talking to us about it. Cover is available from as little as £5 a month – get an online quote now or call us on 0800 640 6600 to speak to one of our D & O insurance experts.