What does directors' and officers' insurance cover?
Directors’ insurance covers a broad range of situations, both within the organisation and with external parties.
- Employee claims – Certain employment-related claims may be covered, depending on the policy wording. These can include unfair dismissal, failure to promote, negligent evaluation, harassment or discrimination.
- Regulators - Companies face investigations by legal bodies such as the Health & Safety Executive, Insolvency Service, Companies’ House, or the FCA, as well as other industry-specific regulators, and the associated costs can be high, even if no wrongdoing is proved.
- Shareholders - Shareholders scrutinise directors' activities closely, demanding appropriate transparency of the decisions they make. If they feel that transparency has not been implemented, they may make a claim against the senior officers and directors.
- European legislation - Directors and officers must comply with a wide range of legal and regulatory obligations, which continue to evolve.
- Creditors/insolvency claims - These claims are increasingly being brought, and individual directors and officers can be held financially accountable for them.
D&O insurance can also provide financial cover for:
- Legal defence costs
- Settlements and damages
- Regulatory investigation costs
- Claims for breach of duty or negligence
- Defamation or misleading statements
- Shareholder and third party claims
What isn't covered
Each director's insurance policy will be different, but in general, D&O insurance does not cover:
- Intentional misconduct or criminal acts
- Injury or property damage
- Claims against the company itself, unless the policy includes entity coverage.
The different types of policies to consider
D&O cover isn’t a single product. It’s a collection of policies that work together to protect individual directors, officers, and the company from various types of claims.
- Cyber Liability Insurance – To protect your business against the increasing risk of financial damage as a result of cyber-attacks, as well as claims against your business in disputes over the storage, use, and distribution of digital personal information
- Side A coverage – Individual director’s insurance if the company cannot indemnify directors or officers (often purchased with Side B coverage, which reimburses the company after it indemnifies directors or officers)
- Side C or Entity coverage – Protects the company if it is sued directly
You may also wish to consider related business insurance policies, including:
- Public Liability Insurance – To protect you and your company financially against injury and damage to property, compensation claims
- Employer’s Liability Insurance – A mandatory requirement if you employ staff, including part-time employees or family members
How much does it cost?
The cost of your directors and officers’ insurance portfolio will depend on the level of cover you have, as well as other factors such as the type and size of your business, your risk exposure, and your status. Your Park Insurance broker can help you construct a portfolio that suits both your needs and your budget.
How much directors and officers' insurance do I need?
You typically need enough D&O insurance to cover the realistic worst case scenario for legal defence costs, as well as any settlements. This will vary based on your company's size, industry, and risk profile. Generally, SMEs buy £1m–£5m, while larger or higher risk organisations may need £10m–£50m or more.
Who pays for it - the employee or business?
Directors and officers insurance is regarded as a corporate expense; as such, the business pays for it rather than individual directors or officers.
Park Insurance- your D&O insurance specialists
For over 30 years, Park Insurance has been providing bespoke insurance for businesses across the UK. Our position as a preferred broker to many of the UK’s largest insurance providers, coupled with our industry experience and expertise, makes us a trusted partner to hundreds of businesses. Delivering professional advice in a clear, client-friendly manner, we source directors’ insurance tailored to your needs and budget. Find out more by contacting us today and talking to one of our advisors.