Managing your risk – Why directors and officers liability insurance is a must-have

Alan Boswell Insurance Management’s Director Adrian Rayner explains why directors and officers liability insurance is a must-have for managers everywhere

Picture this: you’re the health and safety manager for a business and a member of staff has an accident and decides to take further action.

You might assume the business will be the target for this and it has the appropriate insurance cover to protect itself. However, there’s a chance that the injured party – or even the Health & Safety Executive – might pursue you personally for negligence or providing incorrect advice. You’ll potentially be open to being sued or imprisoned.

While this scenario is extreme, it could happen to anyone with a high level of responsibility within a business. Directors, partners and even managers (or ‘officers’, as the cover is known as) can personally be at risk for a variety of reasons – not just health and safety.

“I recommend all senior managers consider taking out D&O insurance  to make sure they are covered,” says Suffolk-based Adrian Rayner. “Essentially it covers individuals within a business, whether you’re a director, partner or someone with authority to represent the company – as opposed to the business itself. It helps to protect both you and your assets.”

Covering all bases

D&O covers liability for actions or omissions (in legal terms known as ‘Wrongful Acts’) made while acting on behalf of the company. Claims can be brought for a diverse range of reasons, including breach of trust, negligence, defamation, wrongful trading and pollution – even if they were made with good intentions. D&O insurance will also protect against some employment claims and if a company pension scheme goes into administration.

Adrian adds that an extension to the policy, known as entity cover, is available too. This add-on product will cover the organisation itself and can be useful if a claim is being made against both the company and an individual director.

“We’ll usually go and talk to our clients about D&O as part of a wider conversation about business insurance. We’ll ask if the individuals want to protect themselves. Your employer will take it out on your behalf – or the directors will buy it through the company – to protect the senior team.

“You always assume that nothing’s going to happen, and if it does, the company is accountable. That’s not always the case.”

Expert advice

Adrian explains that it’s worth speaking to an expert, because there intricacies to be aware of. “I would always recommend speaking to an experienced insurance broker, like Alan Boswell Insurance Management in Bury St Edmunds, to get advice on finding the right cover,” he says. “Find out what they recommend, the cover you need and the cost. They should also be able to give you supporting information and literature, so you’re sure you have the right cover.

“Our aim is to help you understand, manage and control the risks in your business. Insurance is part of that process and is used to protect you against the risks that you’re unable to eliminate.”

5 reasons to take out D&O insurance

1. Your personal assets may be at risk – If you’re accused of an error or a breach at work, your own assets may be at risk.
2. Defence is expensive – If you don’t have D&O cover you could end up funding your own defence if you end up in court. These bills quickly add up and could cost you thousands of pounds.
3. Compensation cover – If your defence is unsuccessful, D&O can help you cover the cost of any compensation due to the other party.
4. It’s affordable For a small business, a policy may only cost a few hundred pounds, even though the claims it protects against can run into the hundreds of thousands. It’s a low price for peace of mind.
5. It’s unique – D&O cover isn’t provided by any other type of liability insurance, such as professional indemnity insurance.

If you would like to find out about D&O or any other type of commercial insurance, contact Adrian on 01472 872872 or visit www.alanboswell.com