Directors & Officers Liability Insurance – Common Questions

Some information on and frequently asked questions about Directors & Officers Liability Insurance

Why Insure?

    • Directors and Officers Liability Insurance covers damages, judgements or settlements and defence costs incurred in respect of breach of duty, breach of trust, breach of contract, breach of warranty of authority, neglect, error, mis-statement, misleading statement, wrongful trading or any other wrongful acts or omissions committed or attempted by or allegedly committed or attempted by any insured person whilst acting in this capacity on behalf of the management company.

What is the Definition of an Insured Person?

    • Directors and Officers are those persons who are authorised to act on behalf of the company and manage its affairs for the benefit of shareholders and others who may come into contact with it.
    • Those persons include executive and non-executive directors and managers.

Great expectations and great exposures

    • Appointment to an executive or non-executive position brings not only personal prestige but may also bring potential personal liability for a negligent act, or an act outside the appointee’s authority or which is in breach of duty or trust.
    • Directors or officers can be held responsible for actual or alleged wrongful acts, errors or omissions, including negligent advice, miss-statement or improper disclosure.

Personal accountability

    • A company’s liability is limited to its assets; but directors and officers can also be sued in their personal capacity and their personal liability may be unlimited (i.e. for their entire personal wealth and possessions).

Furthermore, Section 310 of the Companies Act limits the circumstances under which indemnity is provided to directors sued in their personal capacity whilst acting on behalf of the company. In such circumstances, their defence may have to be funded personally.
Uninsured directors and officers, therefore face the possibility of personal bankruptcy.

Public Liability Insurance

    • Public Liability Insurance enables you to meet any costs and damages awarded to a member of the public if they suffer an injury following an accident on, or linked to, your premises or land.