Underwood Insurance has a BOFFIN!

Underwood Insurance has a BOFFIN!

Tue 11th May 2010

Directors and Officers Liability Insurance

Q    I’ve just found out that as a Director of a Limited Company it is only the company that has the limited liability and my own personal liability is in fact unlimited.  Is there any insurance I can take out to protect this?

 

A    The simple answer is ‘Yes’ it is called Directors and Officers Liability Insurance and it should really be one of the first insurance policies that any Director should take out.

It can sometimes be hard to understand why anyone would want to take on the duties and responsibilities of a company Director and become the potential litigation targets for so many sources. Employees, Customers, Suppliers, Banks, Competitors, Shareholders, Liquidators, Regulators (especially Health and Safety) and even the general public  can all bring an action against any Director if they commit what is termed a ‘Wrongful Act’. Such an act could be a breach of trust, duty or statute, negligence, libel, slander and even Corporate Manslaughter to name but a few. 

Quite often the company itself will provide the legal costs involved in defending its Director but there could be times where this is not possible such as in the situation where there is a conflict of interest (e.g. another Director or a shareholder taking the action) or the company may simply not be in a financial position to do so. On the other hand if the company’s constitution obliges it to defend a Director the insurance can reimburse this.

Don’t forget even though the Director is totally innocent there will still be a cost involved in defending an action and this will generally not be recoverable. 

One point to note is that the government, by its favourable tax treatment, recognises the importance and encourages this class of insurance. Despite the policy normally being bought by the company for the benefit of its Directors there is still tax relief on the premium as well as there being no P11D ‘benefit in kind’ implication for the Director.

To sum up in view of the many duties and responsibilities a director has it is a brave one indeed who puts his own personal assets on the line without some form of insurance protection. Premiums which are based on the limit of liability required; the type of business and its turnover are often cheaper than many imagine.

Take my advice and double check your position now.



[view all news items...]

Claims

Had an Accident?

Click here to find out more

want to make a payment?

broker network Institute of Insurance Brokers british insurance brokers association