Not a lot of business owners are aware of Directors and Officers Liability insurance, or whether they should have it or not. So, here at the Insurance Knight Consultancy, we want to set the record straight and explain exactly what it is, and why you may need it.
Put simply, Directors and Officers insurance is a form of personal protection. Company directors are, believe it or not, in an increasingly vulnerable position regarding their legal responsibilities. Recent changes in UK law mean that Directors are accountable for ensuring that all aspects of the business adhere to the law, and if they do not, then they can face legal action, from other companies, organisations, employees or private individuals. If a Director falls short of their obligations they may face civil, regulatory or criminal proceedings against them, and could even be sent to prison. Having Directors and Officers Liability Insurance can help protect against this.
Some of the reasons a Director may face proceedings are:
-not meeting legal requirements
-failure to protect customer data
-interruption to business
-unfair dismissal of an employee
-the death/injury of an employee at work
-not managing environmental responsibilities
-failure to protect shareholders' or the company's interests
-infringement of copyright or intellectual property
- unfounded allegations which still have to be defended in court
...and the list goes on.
Why do I need Directors and Officers Insurance?
You don't even have to be guilty to be taken to court, which can be very expensive in itself to pay lawyer's fees and legal costs. Directors and Officers insurance covers all of this, as well as any expenses or costs in damages. Having the right cover in place can help ensure a better result, should the worst case scenario happen, and you are taken to court or are facing prison.
There is a huge suing culture in the US, and with new legislation and regulations coming into force in the UK, we may be heading in a similar direction.
Your personal assets, wealth, and even your home may be at risk if someone makes an accusation against you, as you are personally liable to defend yourself against the claim. You may face bankruptcy or insolvency, that is unless you have Directors and Officers cover in place.
There have been a number of new acts, as well as revisions to existing employment laws which companies must be aware of and adhere to. Some of these include the Disability Discrimination Act, the Sex Discrimination Act, the Race Relations Act, and the Employment act. There has also been a revision to health and safety sentencing guidelines, as well as a number of directives from the EU. Although, with Brexit looming it is unclear where exactly the law will stand, in relation to any EU legislation.
With so many new laws, revisions, changes, and confusion, it can be difficult to keep up to date with the latest developments in employment law. There is no excuse for not adhering to these laws, and you can't simply say you didn't know about them.
In 2018, the introduction of the General Data Protection Regulation (GDPR) will also increase company directors' liabilities for data breaches or data misuse. This piece of legislation is being introduced by the European Commission and replaces the Data Protection Act 1998.
In the UK, the GDPR comes into force on 25th May 2018. The main changes are that any data breaches will have to be reported within 72 hours, and in some cases, the individuals whom the data relates to will also have to be notified. Serious data breaches could also result in fines of up to €20m, or 4% of the company's worldwide annual turnover – whichever is higher. The GDPR also tightens restrictions on customer's consent to use data, as well as the rights of businesses to use customer data for profiling, particularly for marketing.
Directors and Officers Insurance from the Insurance Knight Consultancy
Some common misconceptions/objections we often hear are:
"We're a family company, so we don't need this type of insurance"
"Claims against company directors are covered under other insurance policies"
"SMEs are not at risk"
The fact is, that every organisation can benefit from Directors and Officers insurance. SMEs are certainly not exempt and often face the greatest risks, as they do not have the financial resources to defend claims, as larger organisations do. Even in family businesses, disputes can occur. So Directors and Officers insurance really is for everyone.
The Insurance Knight Consultancy has access to a wide range of insurers and providers, so we can tailor the appropriate cover to your business needs.
With our Directors and Officers Liability Insurance, you can eliminate the financial risk for your directors, leaving them free to concentrate on the things that matter most to your business.