Director’s & Officer’s Liability Insurance (D&O) – Protecting the Director’s Personal Assets
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What is D&O Insurance?
D & O insurance provides liability protection to company directors and officers to protect them from claims that arise from decisions they make whilst running a company. The policy protects a Director and Officer by:
- Paying legal defence costs
- Paying settlement costs or awards
- Investigation costs
- Other costs such as mitigation costs, civil fines and penalties etc.
Many people believe that D&O cover is only for those running very large private businesses or public limited companies and this is not the case. Every director or officer is open to claims which can originate from customers, competitors, employees, the company itself, regulators and government and law enforcement agencies. The recently implemented Companies Act 2014 outlines precise duties for directors & officers of companies alike no matter how large or small the entity is. Directors or officers own cash, home, pension pot, other personal assets and even their liberty is at stake should a claim occur.
D&O Cover is not as expensive as it is perceived and should be considered as in many situations the company may be unwilling, unable or not permitted to protect their directors and officers should an action be taken against them.
Who is a Director or Officer?
- A past, present or future director, officer, management committee member, member of the board of managers, supervisory board member, management board member of governor elected or appointed according to law
- A past, present or future director or officer or any natural person who is deemed a shadow director as defined in section 221 of the Companies Act 2014
- Named as a prospective director in the listing particulars or prospectus for a public offering issued
- Employee to whom the Central Bank of Ireland has given its approval to perform one or more of the controlled functions for a company pursuant to Part 3 of the Central Bank Reform Act 2010.
Examples of Claims:
- A slander allegation was made by a customer against an officer of company. A threat to take the manager to court was made but settlement was negotiated and the amount covered under the D&O policy.
- Shareholders in a food manufacturers claimed they suffered a loss and were suing the company’s directors and auditors for breach of duty in relation to overstatement of the financial position of the company.
- An employee was dismissed for gross misconduct after an altercation at work. It was found he had brought the company into disrepute. The employee brought an unsuccessful claim for unfair dismissal against the company but the legal costs suffered by the company in fighting the claim were covered.
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Remember: D&O cover provides liability protection to company directors and officers to protect them from claims that arise from decisions they make whilst running a company. Their personal assets are at stake and other type insurance policies will not protect them. Claims can and will be made against the directors & officers personally, not just against the company.
