Directors' and officers' liability

Directors of all companies are now held, at an unprecedented level, to be personally responsible for any actions and decisions they make on behalf of the company - putting their personal assets at risk if those decisions are tested in the courts.

Legally, the directors of a company and the company itself are separate entities and so may both be defendants, separately or jointly, in any legal action or prosecution. To protect the personal assets of individuals and, crucially, to cover the costs of their defence, Directors' & Officers' Insurance is widely used.

Furthermore, Directors' & Officers' Insurance extends to protect the company itself, rather than leaving it to fund its own defence, thereby acting as a mechanism that also protects the value of a director's personal holding in the company.

Modern insurance policies will not simply insure directors and senior managers, but will also extend to protect all other employees too. Furthermore, the policy may be extended to include coverage for any actual or alleged employment practice violation, which might include:

• Liability for unfair or wrongful dismissal of an employee.
• Wrongful failure to promote.
• Wrongful deprivation of career opportunities.
• Failure to furnish accurate job references.
• Discrimination or harassment on grounds of gender, race, religion or disability.

The policy period is usually 12 months and is underwritten on a "claims made" basis meaning that the insurance responds to claims first made against the company/employees during the policy period. The policy will pay up to the Limit of Indemnity, which is an annual aggregate limit, and a deductible or excess may be applied to each claim.