What is Directors Insurance?
Being the boss means you carry some big responsibilities on your shoulders! As the boss, a director, partner or senior manager you have a duty of care to pretty much everyone you work or deal with and are automatically exposed to ‘unlimited personal liability’ – yes, that’s your personal assets!
If someone thinks you’ve done something wrong in your position even if you no longer work for that company, they can not only sue the company but they can sue you personally. Now that’s a scary thought – right? What’s scarier is that almost anyone can sue you including shareholders, employees, customers, regulators, competitors and third parties.
Directors Insurance (also known as or Management Liability or D&O) would cover losses and/or defence costs if legal action was brought against you for actual or alleged wrongful acts, as well as compensation if you were found liable.
Management Liability Policy Packages
The technical name for Directors Insurance is Management Liability and this policy is made up of three sections.
- Directors and Officers Insurance: Covers the individuals (the director or officer) not the business, from claims made for actual or alleged wrongful acts.
- Corporate Legal Liability: Covers the business from claims made for actual or alleged wrongful acts (Corporate Legal Liability and D&O go hand in hand and are usually covered together).
- Employment Practice Liability: Covers the business against employment disputes, ranging from alleged discrimination, alleged harassment, unfair dismissal and bullying etc.
What can Directors Insurance (Management Liability) cover?
- Defence costs for claims made against individuals for alleged wrongful acts carried out in their capacity as director or officer.
- Compensation payments (awarded costs) if you are found liable.
- Claims arising as a result of;
- Breach of duty
- Employment practice wrongdoing
- Not acting in the company’s best interest
- Health and Safety
- Employee injuries at work
- Acting outside of authority
- Wrongful trading
- Administration of a company pension or employee benefit scheme
- Criminal actions
- Damage limitation on reputation
- Breach of European legislation
What else do I need?
- Blocks of Flats Insurance: If you are a director of a resident’s association.
- Offices and Surgeries Insurance: If you run your business from an office or a surgery
- Professional Indemnity: If your business gives any kind of advice or professional service
- Cyber insurance: If you hold client data, use email, have a website, or take online transactions.
Types of businesses we can cover
- Past, present, and future directors
- Non-executive directors
- Employees in a managerial or supervisory capacity (officers)
- Blocks of flats management companies
Why do I need Directors Insurance?
Legally you don’t need Directors Insurance – but you should have it! No matter how many years’ experience or qualifications you may have mistakes can happen and people can be quick to look for blame and compensation. Why take the risk of having to personally incur a huge legal bill and possible associated compensation costs if you lost a claim?
What policy limit does my company need?
There are many factors to consider when assessing the amount of liability required. This includes the company structure, the number of employees, annual revenue, even the location of your company is a consideration, as you may need cover for different litigious environments.
Limits start from £100,000 through to £5m+, the higher the limit the higher the premium.
A good place to start is to think about your greatest financial exposure; if you make a mistake or something goes wrong, what is it going to cost you?
How much does Directors Insurance Cost?
Each case/insurer is slightly different. This policy is made up of three key covers, so it depends on which of these covers you want to include. To give you a ballpark, the D&O and Corporate Legal Liability covers together would cost approximately £100. The Employment Practice Liability cover is more expensive and could cost an additional £400, totalling £500 annually for all three covers.
Does Directors Insurance cover retired or separated officers?
Any natural person who was, is, or shall become a director or officer of an agency is covered. However, the acts complained of against the retired or separated director/trustee or officer, must have been committed no earlier than the continuity or retroactive date indicated in the policy schedule. This date confirms the start of the original policy and that the policyholder has kept uninterrupted insurance cover since.
Directors Insurance Claim Examples
Our client, a firm of architects, entered into a ‘without prejudice discussion with an employee at risk of redundancy whilst she was on maternity leave. However, the employee brought a claim for unfair dismissal and sex discrimination. A preliminary tribunal hearing found that the insured could not rely on the ‘without prejudice’ discussion to defend the claim and the insurer settled the matter before the full hearing.