D&O Liability Insurance - Protecting Your Senior Leaders

In today’s climate of increased corporate responsibility, protecting senior leaders against Directors’ & Officers’ liability exposures can be a significant challenge. Senior leaders are judged by their decisions and ultimately face the risk of being held personally responsible for the consequences. 

This can result in employees, the company, or third parties taking out a claim against them and the business. These claims can range from, actual instances or allegations of error, omissions, negligence and breach of duty by a senior leadership team.  

Consequently, D&O insurance is now a vital aspect of any organisation's risk management programme. It can help to cover your legal defence costs and possible settlements in the event of a regulatory or company investigation, a defamation case, corporate insolvency, workplace injury, a privacy or data breach, harassment, criminal allegations, and more.

It’s also important to have D&O insurance in place, so you’re still able to attract directors and officers to your company. It can offer balance sheet protection, which when recruiting for talent, can reassure candidates that your company is covered in the event of any litigation.

D&O liability insurance has now become a crucial element to any business, whether you’re a not-for-profit, privately held or public company. Yet, how many companies are aware of its importance? According to a 2020 survey, the vast majority of D&O insurance underwriters don’t believe that companies are as aware as they should be about the risk and cost of D&O litigation, with 83% of respondents expressing this concern.

Who Can Make A Claim? 

Any business with directors or senior leaders is vulnerable to facing a wide range of claims relating to their day-to-day management. These claims can arise from a variety of sources…

1. The company itself - often directors owe their primary duty of care to their company, which can lead to claims brought against them by their own company and/or employees. 
2. Security holders - this includes shareholders and bondholders who have suffered a financial loss due to the wrongdoing of a director. 
3. Competitors - breach of competition laws can result in competitors filing a claim against directors. 
4. Liquidators - in the event of liquidation proceedings, the administrators can bring a claim on behalf of the company for any breach of duty. 
5. Higher power - governing bodies and regulators are often given the power to hand down fines and penalties. 

To gain a better understanding of the policies of D&O insurance, take a look at these three claims scenarios that could occur…

Scenario A) 

Your organisation’s senior leaders negotiate a contract with a business partner. However, your senior leaders misrepresent the company’s finances in order to secure the contract. When the business partner discovers this discrepancy they take legal action against your senior leadership team. 

Solution: 

This would qualify as a wrongful act on your D&O policy, resulting in reimbursement for any legal costs that arise from the incident. 

Scenario B) 

Your company stores sensitive customer information on-site, but your senior leaders fail to enforce adequate cyber-security measures to protect this data. Consequently, a cyber-attack takes place, publicly exposing customers’ personal data. Numerous customers take legal action against your senior leaders for the damages that result from this security failing. 

Solution:

This would qualify as negligence on your D&O policy, providing cover for the cost of customers’ legal disputes related to the breach. 

Scenario C)

When terminating an employee, your senior leadership team doesn't follow the company’s formal dismissal process. In response, the employee takes legal action against your senior leaders for unfair dismissal. 

Solution:

This would qualify as a breach of duty on your D&O policy, offering cover for the resulting legal and employment tribunal costs. 

Plan Of Action:

The climate for claims against directors has never been more hostile. Regardless of your company size, there’s always a chance you could be targeted with litigation arising from the management decisions of your executives. The legal cost to defend in these circumstances is substantial, as are the potential penalties that can be personally incurred. Therefore, you must have a D&O insurance plan in place to protect not only your management but your business as a whole. 

That’s where we come in! Langton London can help you craft an insurance plan to protect your company. Being a specialist Commercial Business and Motor Insurance provider with in excess of 100 years Underwriting and Broking experience, we have dealt with all manners of claims across all business sectors. 

We pride ourselves on being able to tailor-make a product to suit your individual needs, ensuring that you’re fully covered should any eventuality occur. We demonstrate a flexible approach when arranging insurance covers with your best interests ALWAYS our priority.

Please contact us today for free, impartial advice on your current insurance requirements. 

Don’t wait for an instance to occur, protect your business and senior leaders now with D&O liability insurance.