Having got your assets and liabilities protected, it’s a rather strange irony that you don’t insure the liabilities of the company’s most important asset — you and your fellow Directors.
Whilst there are indeed some advantages of being Incorporated, this status does not limit your personal exposures as individuals — in fact far from it! Aggrieved parties (including Government bodies) will actively seek redress where they believe you are guilty of a “Wrongful Act” in the running of your company.
Directors and Officers Insurance – What do you need to consider?
An alleged Wrongful Act can encompass a number of diverse areas such as:
• Health & Safety legislation (particularly if the alleged breach relates to a serious injury or even a fatality). Any Government body can bring an action or investigation.
• Shareholders (which can include fellow Directors) — even happy, family run operations can become divisive, particularly under pressure.
• Employees (having pursued the Company on an Employment dispute, it costs no extra for an aggrieved Employee to also sue a Director individually).
• Creditors (companies and individuals are loath to write off any debt).
• Buying & selling of Companies (either of these activities will increase your personal exposure).
Unfortunately, there are an abundance of potential pinch points for you to manage. Also, no claimant is ever backward in coming forward these days, particularly since the advent of the “no win, no fee” concept. If the action being brought also seeks your disqualification as a Director, clearly, there are even more serious implications for you.
What Directors and Officers Insurance cover is available?
A Directors & Officers insurance policy covers the legal costs of “defending your corner” against any allegations of wrongdoing in running the Company – the size, structure and nature of your business are of little relevance to a claimant.
So, what does this protection cost?
The good news is that prices for SME’s have reduced and wider coverage has been introduced. At Greenfield Insurance we have years of experience in placing business insurance. We work with Markel, a specialist in Directors and Officers Insurance to make sure we get the right insurance cover for you and your business.
Still not sure if you need Directors and Officers insurance, here’s some examples of claims brought against Company Directors individually.
Engineers
Engineering manufacturers entered into a factoring agreement with the claimant, but following the company going into administration, alleged that they used the monies due to the claimant to pay other creditors.
Director personally sued £300,000
Property owners
Director of a property owning company breached his authority in appointing a company belonging to an employee to undertake work on their behalf.
Proceedings issued by the claimant for non-payment of fees of £42,000 following cancellation of the contract.
Clothing manufacturer
Directors of a clothing manufacturers facing disqualification proceedings issued by the Secretary of State for trading whilst insolvent, together with allegations that they failed to maintain their accounts in a satisfactory manner to enable the receivers to carry out their duties, leaving many creditors (including HM Customs and Excise) unpaid.
£56,000 paid in defending the directors named in the proceedings
Cutlery and giftware manufacturer
Contractual dispute following appointment of a website developer to design an online trading website for a giftware manufacturer. The director concerned was not authorized to enter into the contract and the company cancelled the agreement.
Website developers claimed against the director for their costs incurred to date of £48,000
Glazing company
Director of a glazing manufacturers named personally in an unfair dismissal claim form a former employee.
Costs incurred of £14,055 in defending the director
Waste management company
Transport manager of a waste management company prosecuted by the Crown Prosecution Service following an accident involving an unroadworthy vehicle operated by the company.
Claims reserve £15,000
Distribution company
Claim for unfair and constructive dismissal against the finance director of a distribution company by a former employee alleging sexual harassment and other inappropriate activity (sending text messages out of working hours, inviting her on nights out etc).
Costs £21,000
Shipping agents
Shipping agents were required to hold all goods held on behalf of the claimant in a separate account, but following their liquidation, it was discovered that this was not the case, and the claimants would have to recover their goods as a normal creditor.
Directors sued for £61,000.
Makers of timber products
HSE prosecution following serious injuries suffered by a machine operator in clearing a blockage in a stamping machine. There should have been a safety cut out stopping the machine operating with the access panel open, but this had been broken or disconnected.
Defence costs incurred of £25,700
Manufacturing company
Action against directors of a manufacturing company by the Health and Safety Executive following their refusal to respond to a notice to control dust emissions. Directors responsible had failed to adhere to deadlines so action taken against both the company and the directors responsible.
Incurred over £110,000 in defence costs, with a further £60,000 outstanding
Glass manufacturers
Action taken against the directors of a glass manufacturing company by Trading Standards following allegations of pre-stamping of safety glass before it had passed the necessary testing procedure.
Costs incurred £25,718
If you would like to get a personalised Directors and Officers Insurance quote for you and your business or want some more information about the cover available, please call us now on 01489 579808 or contact us using our webform.
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