Cover for directors and senior operational staff
It is highly advisable in today’s litigious and heavily regulated climate that all limited companies and limited liability partnerships purchase Directors & Officers insurance (D&O) to ensure their directors/members and senior operational staff are fully protected.
D&O is intended to protect individuals from claims by shareholders, regulatory authorities and other interested third parties that they have failed in their duties or responsibilities as directors or officers of the company.
An easy way to think of it is that it is like a professional indemnity insurance policy for doing the job of being a director.
In law, directors can be held personally liable for the decisions made on a company’s behalf. They can also be jointly and severally liable if they are deemed to have acted collectively, so the action (or inaction) of one director could financially impact all directors. For example, staying silent at a board meeting and not recording any objection, could in the event of a claim leave an innocent director defending a legal action with the potential of unlimited liability.
Unfortunately, the frequency of claims is increasing, and if the unexpected happens to your company, the actions taken by your directors today may come into question tomorrow.
Employers Practices Liability (EPL) is also typically provided as part of a D&O insurance. EPL covers employment related issues such as accusations by an employee of actions taken in recruitment, discrimination, unfair dismissal or harassment. As such it protects directors from claims by employees in relation to employment issues.
D&O insurance can also include cover for the firm (“entity cover”), as well as the individual principals. However policies vary and this should not be taken as a given.