Directors & Officers Liability
Why do you need it
Directors & Officers (D&O’s) face significant litigation exposure in the course of running a company. As a D&O your personal liability is unlimited and you may not be able to rely on receiving financial assistance from your company in the event you are sued.
Quite simply - executives and managers can make mistakes and are often personally legally liable for them. They constantly walk a fine line, making tough and complex decisions with huge impacts often based on limited information available, for example in merger and acquisition situations. Cover is usually taken out and paid for by the company.
Claims can be brought by the following parties:
- business partners (vendors and suppliers)
- consumer groups
- government enforcement / regulatory groups
What is covered
The core purpose of a D&O policy is to provide financial protection for an executive against the consequences of actual or alleged "wrongful acts" when acting in the scope of their managerial duties. The D&O policy will pay for:
- Defence costs (legal fees)
- Defence costs for Criminal Actions (up until the point of final adjudication)
- Investigation costs - FCA / HSE / Inland Revenue
- Awards, judgements & settlements
All current, future and past directors and officers of a company and its subsidiaries are covered under a D&O policy, which can also include non-executive directors. In very specific cases like securities claims, the policy can even be extended to cover claims against the company itself.
D&O insurance is provided on a claims-made basis. This means that claims are only covered if they are made while the policy is in effect or within a contractually agreed extended reporting period, irrespective of when the event giving rise to the claim occurred.
What we do
Typically, D&O policies have a Side A and Side B section:
Side A - when indemnification is not available (insolvency, legally prohibited)
Side B - when the company provides indemnification but seeks reimbursement back from the policy
Plus Risk is different.
We have combined Side A and Side B, covering directors regardless of whether loss is indemnifiable by the company. This allows us to remove the complexities that could arise around indemnification and provide our insureds with ground up coverage with no compulsory deductible, other than with respect to securities claims.
Limits & Policy
Limits available up to GBP 10,000,000
Any One Claim (AOC) language as standard
Access to a dedicated legal helpline to assist with legal issues
Generous Additional Policy Benefits, including:
- Bail Bond Costs
- Crisis Event
- Difference in Conditions
- Outside Directorship Cover
- Pre-Agreed Run-off rates
- Pre-investigations and investigations
- Pollution Defence Costs
- Public Relations Expenses
- Ring fenced non-Executive Directors limit
- Securities entity coverage as an optional extension
Feel free to contact us or pick up the phone to see how Plus Risk can assist you and your clients.
A company was developing a device for preventing disease. It entered into an arrangement with a partner for exploiting the product. The product turned out to be ineffectual. The partner had incurred substantial set-up costs and sued the company and its directors, alleging misrepresentation of the device’s properties. Defence costs and damages totalled £326,000.
A UK public company had a subsidiary in the US. The subsidiary hired a member of staff from a competitor. The competitor filed a lawsuit against their former employee alleging breach of contract, conversion of client lists and misappropriation of trade secrets. The total claim exceeded $1,000,000 and included significant defence costs for the employee.
Imprisonment for Misleading Statement
The Financial Conduct Authority brought criminal proceedings against the finance director and the chairman/CEO of a publicly traded software company for a misleading trading statement designed to induce others to buy shares in the company. They were found not guilty of knowing it was misleading, but their larger expenditure on defence costs did not prevent them from being found guilty of making the statement recklessly. One was jailed for two years; the other for three and a half.