1. Director Disqualification Disqualification orders are from 2 to 15 years. Even after the ban the stigma remains: credit history and personal reputation may be permanently damaged. D&O insurance is designed to pay for the legal defense costs as and when they are incurred. We understand the legal processes, and have a highly experienced and tenacious claims team. It’s good to have the strongest and toughest in your corner when facing a crisis.
2. Investigations It’s very easy to complain about a company. The BERR’s Companies Investigations Branch considered complaints against nearly 6000 companies in the year 2009. The financial risks of investigations can be considerable.
3. Personal Liability Mistakes can be very costly. D&O Insurance is not designed to cover dishonest or fraudulent acts, but directors can be found personally liable when they haven’t been dishonest, deliberate or fraudulent by failing to take sufficient care – in which case awards and defense costs would be covered.
4. Criminal Liability Directors could go to prison for their actions, inaction or ignorance. The very best defense can be invaluable, but very costly. D&O Insurance cannot cover the criminal penalties – that is against public policy – but it can cover the costs of defending a claim up until the point guilt is established.
5. The SME Set-up The SME set-up is fast, flexible and energetic but often with little risk management infrastructure (in house legal, risk managers or compliance managers) and few formal control processes. Sooner or later, some businesses may make expensive and time-consuming mistakes. D&O insurance available from Profession Protect covers the individual director’s defense costs and employment tribunal costs as well as the associated awards. Employment Tribunals are formal legal hearings and can be expensive and last for months.
6. Family Companies Family run businesses, which make up a large proportion of UK businesses, carry with them exposures for the individuals concerned.
7. Partnerships Partnerships can be particularly vulnerable to employment-related claims. Whilst they are not governed by Companies Act legislation they are still subject to the raft of employment legislation and scrutiny by the Equality and Human Rights Commission. We have access to specific insurance packages for the management liabilities of partners at their work place, and on the board of other companies.
8. Unfounded, Mischievous and Scurrilous Allegations Directors can face allegations, unfounded or otherwise, which they will be forced to defend, and even unfounded allegations can be extremely expensive, time-consuming and stressful. D&O cover can be a huge relief at such times.
9. Past, Present and Future Actions can (and do) follow directors from job to job. Actions cost money and can be very stressful on both the director and his family. Retirement offers no escape, nor does death as directors’ estates can be pursued. D&O covers past directors and the estate. Even when the policy is no longer in force, some of the D&O insurance available from Profession Protect covers directors for a run off period following retirement, as long as their D&O insurance was in place at the time of the alleged incident.
10. Inadequate Cover? Legal Expenses vs D&O insurance Legal Expenses policy limits tend to be in the order of £50,000 to £100,000, which can be inadequate for larger protracted actions. Legal Expenses insurance often only responds when an insured has good prospects of success. It’s precisely because directors might well lose an action that D&O insurance is so essential (to fund defense costs or settlements). Faced with a career and lifestyle-changing crisis they may not want to rely on a legal expenses policy that could only offer cover if they are likely to win.
To find out why NC Stirling is the home of professional risks and to request a free review of your insurance needs simply call us now on 0141 332 9898.