Directors’ and Officers’ (D&O) liability Insurance is slowly being seen as a necessity within the business world, but are you aware of the risks you are running without adequate cover?
As a director or officer of a company, what if you were told you could lose your personal belongings (including your house) due to a poor business decision that you made? You would probably want the peace of mind knowing that you were protected.
If you’re not already, we’ve put together the top 5 reasons why you should seriously be considering D&O cover:
Directors can be personally liable for any losses that are incurred
As mentioned above, a directors personal assets are at risk if a claim against them is made. This is often cited as one of the most important aspects of a companies’ D&O insurance programme, especially from a personal perspective.
You will not be covered elsewhere
It’s a myth to think that D&O insurance is not necessary because another insurance policy will pick up the bill. Unfortunately that’s just not the case, D&O Insurance is the only type of policy that is solely dedicated to the protection of management.
Your private investors and shareholders can sue you
It may seem unlikely, but things can change quickly when business turns south. If private investors believe they have suffered financially due to the mismanagement of the company then they may bring a claim against you to recover the losses they have suffered.
D&O claims are becoming increasingly common
36% of companies reported being a victim of a D&O claim in the last 10 years*. Breaking this statistic down further, 33% of Public companies reported a D&O claim against them in the last 10 years, compared to 27% for Private companies – which dispels the common opinion that D&O claim activity is solely limited to PLCs. However, these figures are in stark contrast to Non-Profit organisations, where the figure stands at 63%.
Legal costs for defending allegations can be costly
It’s not uncommon for legal fees in defending a D&O claim running into thousands of pounds. Regardless of whether the claim has any merit, and thus the policy providing protection for any eventual settlement, the cover for defense costs alone can be worthwhile.
Further to these points made above, you may be surprised at the cost of a Directors & Officers policy. It’s not uncommon for cover to be placed for around £500, a drop in the ocean compared to the expenses you might be faced with in the future.
If you would like to discuss your individual circumstances, we would be more than happy to provide any advice that you might need. Please do not hesitate to get in touch.