Directors and officers liability insurance
Directors and Officers have a multitude of diverse responsibilities and in today’s litigious world can face unlimited liability. Directors and officers duties have been established through various statutes, regulations and case laws.
If a Director or Officer fails or is perceived to have failed in any of his duties then a claim from Shareholders, Creditors, Government and Regulatory bodies, Employees, Auditors, Liquidators, Customers or Suppliers could quite easily result in the Directors and Offices not being able to defend themselves and ultimately result in being disqualified from holding the position of director and/or lead to hefty legal costs and awards for damages.
Wrongful acts can include a breach of trust or duty, neglect, error, misleading statements, wrongful trading. Where duties are delegated the Director is responsible for ensuring that the person to whom the duties are delegated is sufficiently experienced, reliable and honest. Directors must act honestly, in good faith and in the best interest of the company and must ensure that they do not have any conflict of interest.
Directors and officers insurance (D&O insurance) can cover the cost of defending these proceedings, as well as any compensation costs that arise from an unsuccessful defense of any claims made against them by shareholders, investors, employees, regulators or third parties and can, certain policies, also cover the defence cost arising from criminal and regulatory investigations into your company where no actual wrongful act has been alleged against a director.
Do I need Directors and Officers Insurance?
In a claim situation the Director’s
personal assets are at risk. Directors cannot rely on the
company indemnifying them. Often such an indemnity from the
company will be in contravention of the Companies Act.
Regardless of the stipulations of the Companies Act in the
event of insolvency there will be no prospect of the company
indemnifying the Directors and Officers.
The Directors and Officers Liability Insurance Policy will
pay on behalf of the Director his legal costs and expenses
and any civil damages awarded against him.
