Directors & Officers (D & O) Cover - what is it and why should you have it?

D & O policies provide liability cover for company directors and officers to protect them from claims which may arise from the decisions or actions they take within the scope of their regular duties. These policies are becoming more and more an essential cover to have with the increase in responsibilities of company directors in relation to employment legislation, regulatory and corporate governance requirements.

Company Directors and Officers hold positions of trust. They will be liable for any act which is negligent, outside their authority or in breach of their own responsibilities. They should be aware that they can be personally liable for their acts or omissions and without insurance are effectively risking their personal wealth and future, since the financial implications of a legal action can be disastrous. In defending an allegation against you as a company director or officer of a company you can incur significant costs and expenses. The D & O policy is there to protect your personal assets.  A company's liability is limited whereas in extreme circumstances you as a director can face UNLIMITED personal liability.

Company directors and officers are accountable not only for their own actions, but also for those of their fellow directors and officers. Their duties are onerous and the typical types of exposure that they face include liabilities arising from:

• Health & Safety breaches and failure to comply with the requirements of the Safety, Health and Welfare at Work Acts 1989-2005
• Wrongful Trading
• Breaches of the Companies Act 1963 - 2009
• Breaches of Disability and Discrimination legislation
• Dishonesty of fellow directors
• Failure to supervise
• Racial and sexual discrimination
• Breaches of EU directives and Regulations

The D & O policy includes cover for costs and expenses that are incurred in investigation, settlement, defence or appeal of a claim. Cover is on a claims made basis i.e. the policy will only respond to claims discovered and notified to the insurer during the policy period.

The following are some examples of D & O claims:

• An employee was crushed by a reversing forklift. The HSA investigated both the company and individual directors for failing to ensure a safe working environment. Their costs were met by the insurers.
• A male applicant for a job had long hair tied neatly in a bun at the back of his head. He was asked by the interviewer if he would consider cutting his hair. He was unsuccessful in his application for the job, and alleged sex discrimination as he would have been treated differently if he were female. The Labour Court upheld his complaint.
• The neighbour of a retail company issued proceedings for business interruption after the retail company inadvertantly cut out their electricity
• A breach of trust action was brought against a director after he accidentally released an employee's medical records.

The probability of a claim being brought against the Directors and Officers of a company has increased significantly in recent years because of the development in legislation such as the Companies Act, Environmental and Health and Safety legislation and consequently Company Directors and Officers who do not hold D & O cover do so at their peril and leave themselves exposed to potentially substantial claims against them personally.