D&O insurance protects directors, officers and other people with managerial responsibility from legal and other costs they may become personally liable to pay as a result of litigation.
Legislation over the last few decades has made the position of directors and senior managers more onerous in that it has increased their accountability for their actions or inactions, and for that of others.
There are many laws now that regulate companies and their directors. In addition, ‘no win, no fee’ arrangements have increased the potential for claims to be made against a company and its senior management. See our case studies below to understand the types of claims being made.
It is frequently misunderstood that a company having limited liability status protects its directors and senior managers from personal liability. It does not. In reality, a director’s liability is potentially unlimited even to the extent of a charge on their salary if assets such as their home, cars and savings do not meet their liabilities.
There are many and varied groups of people or bodies who can bring actions, including:
Even if allegations are unfounded defence costs can be crippling, especially to smaller companies. Other legal costs, such as attendance at investigations into the affairs of the company, should not be underestimated.