Directors and Officers liability insurance protects directors and officers as well as senior managerial staff against third party claims arising from their actions and decisions in their official capacities and the costs incurred in the event of a regulatory investigation, and losses arising from third party and employee fraud.
Many people think that buying Directors and Officers (D&O) liability insurance is the preserve of large corporate organisations and Plc’s. After all it is these companies that carry the biggest exposures from shareholders and all of the regulatory “red tape” that goes with being a listed company. Whilst it is true that the larger corporates do buy the cover and pay a premium commensurate with their increased levels of exposure there can be many benefits in buying D&O cover for smaller private limited companies. Smaller companies often cannot afford to have the luxuries of an HR department, in house legal teams or non executive directors. The costs in defending some of the most common types of claims can be onerous and could significantly impact the cash flow of a small company, let alone be very distracting and stressful for the individuals concerned.
Claims can come from many and varied sources and often do not fully develop, but they can be costly to respond to. A Directors and Officers policy offers peace of mind from costly legal bills and will in many cases pay awards and claimants’ costs if awarded against you. Claims examples include:
A slip of the tongue at an industry event or a badly worded article naming a competitor could
lead to a writ which can be costly to defend, not to mention the growth in the use of social
media such as Twitter, Facebook. Even if one of your staff made the comment or blogged,
you as a director of the company can be held responsible for failing to supervise and
implement correct procedures to deal with this
If you rely on funding from a bank, private shareholder or venture capital source you can be exposed to claims or pressures to sell or restructure the business for them to make an exit. Finance providers are one of the most common type of claimants against directors of private businesses
Many people think that shareholder claims only come from Plc’s. This is not the case and
situations which can trigger shareholder actions in private limited companies include, marital
breakdowns leading to the need for shares to be sold, splits between business partners,
disputes among directors involving commonly remuneration, actions taken to venture
capitalist shareholders, sleeping shareholders not happy with the running of the company
Employee legal actions are rising rapidly and many companies have been on the receiving
end of employment tribunals. These are often complex involving multiple heads of action
and are costly and complex to defend. This cover provides full protection against
Directors must exercise skill and care, comply with statutory obligations, act in good faith and fulfill fiduciary duties and they must do so with consideration of shareholders, investors, creditors and employees. In addition, there is increased scrutiny from law enforcement agencies and regulators to comply with ever changing legislation to consider.
Anyone can make a mistake, and in these increasingly litigious times it is more important than ever to protect your legal liability. As a Director your own personal assets are at risk, in extreme cases you could lose your house.
Directors & Officers Liability (D&O)
- Director called to public enquiry after fatal accident – €25k
- Two brothers (One major shareholder and the other a minority shareholder). One claims that the major shareholder is acting in an oppressive way in running the business in an attempt to make the workplace as uncomfortable a place as possible for him in order to force him to sell his shares – €170k paid to date
Entity Employment Practices Liability (Entity EPL)
- Irish financial institution settled a discrimination and sexual harassment claim for € 150k with costs of €120k
- € 56k for a checkout employee of a supermarket sacked after the company wrongfully accused her of turning up to work smelling of alcohol
- A barman who was terminated after being questioned following the disappearance of some money. He sued for wrongful dismissal and was awarded € 35k plus costs by the High Court, principally as the company did not follow proper disciplinary procedures
Entity Liability (Entity)
- Corporate manslaughter case – Gas tank explosion – Health & Safety violations – Directors did not work closely enough with their staff on Health & Safety issues – Over €60k in defence costs incurred – Regulatory Body claims
The types of claims and claimants that can take a claim:
- Shareholders: Shareholder Director disputes, control issues, liquidation/wind up orders
- Employees: Wrongful/Constructive dismissals, harassment, bullying, discrimination
- Regulatory Bodies: Breach of industry regulations (health and safety, customs and excise etc) Increased focus on corporate governance.
- Creditors: Breach of trade practices, anti trust allegations
- Fellow Directors: Directors suing each other
If you would like to discuss our D&O products further or to obtain a quotation, please contact Declan Andrews directly on 01 632 1312 or email email@example.com