D&O Insurance Guide

D&O Insurance Guide

If you are a director or a senior officer within an organisation then directors’ and officers’ insurance (D&O) is something that you should consider taking out. Why? Because the number of claims being made against organisations’ leaders has grown rapidly since the financial crisis of 2008 – a situation that has been made worse by the rising number of risks that organisations face.

When D&O – also known as management liability insurance – was created it was done so to protect the leaders of large corporations from action surrounding financial mismanagement or a breach of duty. Now, in the post #MeToo world where cybercrime is a fast-growing problem, a new category of ‘event-based’ claims have sprung up and these are causing further headaches.

Despite this, and somewhat alarmingly, a recent small and medium sized enterprises insurance survey by Datamonitor found that just 23% of respondents had directors and officers cover in place. That means that over two-thirds of the UK’s small business owners could be left financially vulnerable should a claim be brought against them.

D&O insurance from Coversure Ilkeston, Derbyshire’s leading independent insurance brokers, can effectively protect you should legal action come your way. In this new blog we’ll guide you as to what D&O insurance is, who it’s for, what it can protect you from and even give some insider’s tips as to how you can save on the cost of your protection.

We hope that you’ll find this to be of interest but if you would like some personalised help and advice or a no-obligation directors’ and officers’ insurance quote, then please get in touch. You can call us on (0115) 930 3030 or email Coversure Ilkeston here and one of the team will get back to you as soon as possible.

What Is Directors’ & Officers’ Insurance?

Put simply, this is a policy that protects an organisation’s leaders – be that a company or a not-for-profit – from legal action that is brought against them in relation to the actions that business has taken or failings they have made in the performance of their duties. Typically, a policy will cover both the cost of defending the claim and any awards that are made should it prove successful. With courts able to hand down fines, compensation or even prison terms, having this protection in place can give great peace of mind for an affordable premium.

Who Is D&O For?

While this cover was created in the US in the 1970s to protect leaders of big corporations, it is now enjoyed by senior figures in organisations of all sizes. The greatest growth in recent years has come from those in SMEs. This has come about in-part as the industry has created SME-friendly covers and in-part as the owners of these enterprises have become aware of the risks they face and the potentially ruinous consequences of them.

What Can Directors’ & Officers’ Protect You Against?

A good quality policy can protect you from a wide range of common legal actions, including:

  • Employment practices and human resources issues – such as unfair dismissal
  • Shareholder actions – including over performance problems
  • Reporting errors
  • Inaccurate or inadequate disclosure such as in company accounts
  • Misrepresentation in an organisation’s prospectus
  • Decisions exceeding the authority granted to a company officer
  • Failure to comply with regulations or laws
  • Health and safety claims, including corporate manslaughter
  • Breach of duty or trust
  • Wilful negligence

Legal action can come from a range of sources. According to leading insurer Allianz these include:

  • Creditors
  • Stockholders
  • Customers
  • Suppliers
  • Competitors
  • Employees
  • Bankruptcy trustees
  • Subsidiaries
  • Other directors

With the cover so wide and the potential sources of action so broad, getting a D&O quote makes a lot of sense.

How Can You Save On Directors’ and Officers’ Insurance?

While this is a complex area of cover, there are some simple ways to keep your premiums down. Our top tips for cutting the costs of your D&O protection are:

1. Use a specialist independent broker – yes, we’re bound to say that, but its true. This is a highly specialised area of insurance and it’s important to get the right protection for your business by talking to someone who really understands it. That way you can get the cover you need and not pay for elements that you don’t. An independent broker will also be able to do the shopping around for you – so saving you precious time – and may have access to policies that the public doesn’t enjoy

2. Avoid claims – it sounds obvious, but nothing is more likely to push up your premiums than a claim. Unlike many policies – car, public liability or landlord for example – where accidents and claims can often be beyond your control, if you ensure that you always do the right thing and work with people you can trust not to break the rules then you can significantly reduce the risk of action being brought against you

3. Be quality-conscious – given the seriousness of this cover and the implications of being left inadequately protected – fines or even imprisonment – you need to make sure you get high -quality cover that protects you from the risks your organisation faces. As with all insurances you will often see policies with eye-catchingly low premiums but if they don’t protect you in your time of need, they can prove to be a false economy…

4. Combine your covers – if you are taking out D&O then there’s a good chance you will have other business insurances such as public liability, professional indemnity, employers’ liability or business insurance itself. You may be able to combine these into a package of cover that could reduce your costs and give you the convenience of having a single policy to administer

Directors’ & Officers’ Insurance: A Small Price for Great Peace of Mind

Directors’ and officers’ insurance then makes a lot of sense for organisations of all sizes. For a small premium you can gain great peace of mind and protection from a wide range of threats. If you’d like some help getting the cover that’s right for you, then please feel to get in touch. You can call us on 0800 308 1234 or email Coversure Ilkeston here and one of the team will get back to you as soon as possible.

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