Why Buy Directors & Officers Insurance?

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It has become apparent over recent years that society is developing into an increasingly litigious culture. There is now more emphasis on Companies to provide a better working environment and they must demonstrate a Duty of Care at all times.

The Duty of Care comes in many formats from the financial management of the company through to ensuring a safe working environment for their employees.

What is Directors & Officers Liability Insurance?

Directors and Officer Liability Insurance will cover any civil or criminal offences including defence costs and awards. In addition, not only is cover available for all Directors and Officers of the Company but it also extends to include Managers and Key Employees.

You will be aware that current Law states that if an individual of a Company is sued directly then, in some circumstances, he/she is forbidden to have the defence costs or claim awards paid for by the Company.

To summarise, without Directors & Officers Liability Insurance your homes and personal possessions are at risk.

What does Directors & Officers Liability Insurance cover?

Directors & Officers Liability Insurance is designed to cover Private Companies domiciled in the UK, Non-profit organisations in the UK and Resident’s management Companies.

The cover afforded will include key area such as:

  • Financial mismanagement
  • Breaches of Company Law
  • Breaches of Tax Law
  • Employment issues
  • Breaches of Environmental Law

There are infinite further aspects which fall with the scope of cover.

Directors & Officers Insurance Typical Claims Examples

Shareholders / Company

  • A shareholder in a building contractor brought an action against a director because he was concerned by the way the company was being run. The claim alleged negligence and maladministration of the company’s affairs that led to a loss in the value of the shareholding.
  • In a take-over, the Chairman of the company being purchased wrote to the shareholders advising them not to accept an offer, as it was inadequate. The offer eventually accepted was lower than the offer that had been turned down and the investors sued the Chairman for bad advice.
  • An advertising agency was successful in bringing a claim against its former managing director for diverting parts of the business and its opportunities to his new company. The court held that the managing director had misused the property of the agency, therefore breaching his fiduciary duty, that he was personally accountable to the company and that he should provide equitable compensation.


  • Two directors of a construction company which went into liquidation were held personally liable to the creditors for £417,000 which had been paid to another director. They were found guilty of a breach of fiduciary duty and wrongful trading.
  • A director signed a company cheque but omitted the word ‘Limited’. The cheque was not honoured and by the time the corrected cheque was re-presented, the company had gone into liquidation. As a consequence, the managing director was held personally liable for the value of the cheque, over £30,000.
  • A boat builder went into liquidation with losses of £1.5 million. The directors had believed that the company was making a profit but the liquidators sued the directors for negligence after discovering no accurate financial records were being kept.


  • A former director of a company sued the current directors, alleging that they had conspired to deny him his correct pension benefits
  • After receiving repeated warnings for lateness and poor attendance a female employee sued a director and personnel manager of her employer for sexual harassment.
  • A former employee of a company sued one of its directors claiming that the non-competitive agreement within their contract was excessive and unfair.

Regulatory – Environment Agency

  • Two company directors were convicted of illegally dumping 12,900 tyres on a site in Devon. A fellow director was imprisoned for operating an unlicensed waste transfer station.

Regulatory – Tax/Customs & Excise

  • Two directors of a demolition firm were prosecuted by the Inland Revenue for failing to keep proper tax records.
  • The company secretary of a leisure group who owned a number of bars was prosecuted for short measures being served at one of the bars.

Regulatory – Corporate Manslaughter / Health & Safety

  • Following a fatal coach crash, two directors of the coach company were charged with manslaughter.
  • A driver fell asleep whilst driving for the family-run haulage company for which he was employed. Two motorists were killed. The court held that the operations manager should have ensured that his driver adhered to the relevant driving regulations. He had also failed to keep in close touch on these matters with his co-director. Both directors incurred substantial defence costs before being convicted of corporate manslaughter.
  • An employee was killed having fallen into a plastic-shredding machine. The Health & Safety Executive investigated the accident and concluded that two directors were responsible for not providing the employee with a safe place to work, particularly as they had been instructed that the machine was not to be used. The incident was also reported to the Police and Crown Prosecution Office who brought up a charge of manslaughter. One of the directors lost his £250,000 home as a result of the incident.

Regulatory – Companies Act

  • Directors were held in breach of the Companies Act after their inadvertent failure to identify the company correctly on company notepaper and invoices.


  • A competitor sued a director of a company for defamation after he made disparaging remarks about the business practices of the competitor at a conference and the comments were repeated in the local press.


  • A director took an order at a trade fair but could not recall the details the next day and was subsequently sued by the customer for breach of contract.
  • A customer sued a marketing director after promotional material, which the director had approved, gave incorrect prices for the product range.

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