Allianz Insurance research shows that only 34% of small and medium business leaders are aware of the protection Directors & Officers (D&O) cover provides, with more than half of business leaders – SME and Mid Corporate – stating that they did not realise that a company director can be held personally and legally liable for a business decision.
To address this issue and help you in overcoming the misconceptions your clients may have we’ve created a document detailing the top ten reasons to buy D&O insurance. Here are the Top 10 reasons to buy D&O insurance by Allianz.
01: Directors’ personal assets are at risk
If a director has been accused of breaching their duties, they are personally liable to defend the claim. Their personal assets are potentially at risk if they do not have adequate D&O cover.
02: Investigations by regulators are getting more and more common
Investigations and fines imposed by a regulator or body such as the Health & Safety Executive are one of the primary drivers of claims in the current UK business climate.
03: Defending a legal action can be costly
Legal costs for defending allegations against the company or one of its directions can often run into tens of thousands of pounds.
04: Employment practice claims remain a large threat to directors
In an increasingly litigious society employment practice claims such as sexual harassment or wrongful dismissal can result in astounding settlements.
05: Your investors can sue you
If investors lose value in their shares as a result of a director or company’s alleged misconduct they could seek compensation via the courts.
06: Protection in case of bankruptcy or insolvency
If faced with bankruptcy or insolvency, creditors may pursue legal action against directors if they feel that they have not acted in their best interests.
07: SMEs are just as vulnerable as large companies
SMEs are not exempt from D&O claims, they face exactly the same risks and regulations as their large peers, but often do not benefit from in-house HR or legal terms.
08: D&O claims are NOT covered under any other liability policy
A common misconception is that alleged misconduct by directors or companies is covered under other liability policies such as Professional Indemnity.
09: D&O insurance is more affordable than ever
A D&O policy can cost from under £500 per year, yet the total cost of a D&O claim can run into hundreds of thousands, if not millions of pounds.
10: D&O helps attract talent
Not having D&O insurance in place may put off talented individuals from joining a company as they will not be protected.
Claims Examples (These case examples are for illustrative purposes only and are not Allianz policyholders)
An Engineering company dismissed an employee for poor performance without following a fair dismissal procedure. The employee subsequently made a tribunal claim for unfair dismissal and an agreement was reached to pay the employee £50,000.
The director of a management consultancy is quoted in the press as making some derogatory remarks about one of its major clients, based on the information they held about them. As a result, the client sued the company and the directors alleging defamation and breach of confidentiality. The Information Commissioner’s Office is investigating the company and the directors in respect of their data protection obligations.
For more advice please call us on 01604 904001
