As a director of your company you have an exposure. The belief that being a limited company completely protects you is unfortunately a myth. The reality is somewhat different and someone can pursue you just as easily as the company. The problem is that whereas your company has limited liability, you do not, and therefore your personal assets are at risk. A Directors and Officers policy protects your personal assets and will defend actions brought against you.

The main reason clients give for not seeing the need for Directors & Officers Insurance is that as they always doing everything correctly then there will be no claim. Yes, you may do everything correctly but that will not stop someone trying it on if you have grieved them in some way, whether it be a disgruntled employee or an annoyed competitor. The claim itself may well be successfully defended but not before you have spent lots of money defending the action which 99 times out of 100 you will not be able to recover back.

A Directors & Officers will pay for these defence costs and civil compensation should the claim be awarded against you. If the action is a punitive one, the policy will still pay the costs to defend you. Furthermore insurers can now also quote for Corporate Liability (covers the company) and Employment Practices disputes. Most insurers will now also include some fidelity cover free of charge.

If you have a Commercial Legal Expenses policy, you may find that some of the cover under the Directors and Officers policy is duplicated. However, please note that a Commercial Legal Expenses policy will normally carry a 51% rule, which means that the insurer will not deal with the claim if there is more chance that they will lose. A Directors & Officers policy does not have that rule so even if there is only a 1% chance of success the policy will still activate.

Summary of cover available;

• Directors & Officers Liability - Covers claims against Directors, Partners or Officers of the company for any mistakes or omissions they might make in their role.
• Corporate Legal Liability - Cover protects a company from claims made for wrongful acts. This could be anything from a breach of contract to copyright infringement or other intellectual property. The introduction of the Corporate Manslaughter and Corporate Homicide Act 2007 (the 2007 Act) has also put a spotlight on Corporate Legal Liability insurance.
• Employment Practices Liability Insurance - Known in the trade as EPL insurance or EPLI, provides coverage to employers against claims made by employees alleging: Discrimination (based on sex, race, age or disability, for example) Wrongful termination. Other employment related issues, such as failure to promote.

Other sections to consider include;

• Crime - Covers financial loss resulting from third party / employee fraudulent acts