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About Sam Leeder and Paul Taylor of Actus Insurance, Sheffield

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10 reasons to buy Directors & Officers Liability insurance

Nov 26, 2018

I first remember directors and officers liability insurance (D&O) becoming more high profile around 15 years ago; at that time it was being pushed by insurers and it was really expensive, so only large companies bought it.  Over the years, however, more and more people have become aware of the need for the cover and insurance premiums have reduced significantly as its popularity has increased.

That said, I am always amazed at how many business owners I meet who have never heard of the cover and who haven’t been advised of the need for it. So why should you consider protecting yourself and your business with D&O cover?

  1. Employment practice claims continue to be a large threat to individual directors

    Particularly given the recent change in the court fees the number of tribunals has increased massively.  Directors and officers insurance protects the individual director from claims such as sexual harassment or wrongful dismissal.

  2. SMEs are more vulnerable than large companies

    SMEs face exactly the same risks and regulations as large companies, but don’t have the in house resources to deal with these regulations.  The decisions made within the business are far more obviously attributable to the business owner than they are within a large business.

  3. 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.

  4. Investigations by regulators are becoming more and more common

    Investigations and fines imposed by a regulator or body such as the Health & Safety Executive are particularly difficult to defend and the consequences of prosecution can be extremely severe.

  5. Defending a legal action can be costly

    Legal costs for defending allegations against the company or one of its directors can easily cost tens of thousands of pounds.

  6. 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.

  7. Protection in case of bankruptcy or insolvency

    Creditors may pursue individual directors with legal action, if faced with bankruptcy or insolvency, if they feel that you have not acted in their best interests.

  8. D&O claims are not covered under any other policy

    A common misconception is that alleged misconduct by directors is covered under other policies such as Professional Indemnity, however this is not the case.

  9. D&O insurance is more affordable than ever

    The cost of a typical D&O policy for an SME is now under £500 a year, however the costs of a claim can run into the hundreds of thousands.

  10. D&O helps attract talent

    If you are looking to bring in senior members of staff or non exec directors they may not be willing to join your business without adequate D&O protection.

If you'd like to discuss this further please contact us.

Sam Leeder ACII

Director

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