Directors' and officers' liability insurance
Wrongful acts include:
- breach of trust
- breach of duty
- misleading statements
- wrongful trading
Do I need it?
If your company has directors or key managers, directors’ and officers’ liability insurance can cover the cost of compensation claims made against them by shareholders, investors, employees, regulators or third parties.
Directors and officers have specific duties, responsibilities and powers relating to their positions. These are usually set out in their job description or terms of reference. If a director or officer of your company is found to have acted outside of their terms of reference, civil, criminal or regulatory proceedings can be brought against them.
Directors’ and officers’ liability insurance covers the cost of defending these proceedings, as well as any compensation costs that arise from an unsuccessful defence.
If directors and officers do not have insurance, they face a greater risk of not being able to defend themselves against:
- disqualification from holding the position of director
- civil proceedings which can lead to hefty legal costs and awards for damages
- criminal prosecution which can lead to fines and possible imprisonment
What it covers
Directors’ and officers’ liability covers claims made by:
- regulators, e.g. investigations by the Health and Safety Executive (HSE) or the Office of Fair Trading shareholders or investors, e.g. for failure to act in the company’s best interest
It also covers claims brought in relation to:
- breach of European legislation
Employment practices liability insurance can be bought as an extension of directors’ and officers’ liability insurance. It covers employee discrimination claims, e.g. for unfair dismissal, harassment, or failure to promote a person.
Directors’ and officers’ liability sometimes covers defence costs arising from criminal and regulatory investigations into your company where no actual wrongful act has been alleged against a director. Contact your insurer to find out what your policy covers.
What is not covered
Directors’ and officers’ liability does not cover claims made against your organisation as a whole, only those made against individuals for alleged wrongful acts carried out in their capacity as directors or officers.