Directors and Officers Insurance

A company’s Articles of Association delegate the management of the company to its directors who, in practice, make policy decisions on behalf of the company. They also enter into contracts and transactions as agents of the company and assume the role of trustees in controlling the assets of the company.

Executive directors normally have a contract of service and so also have the status of employee. Any director or officer holds a position of trust and responsibility and may be liable to the company, the shareholders, creditors or employees.

Recent incidents involving railway, road transport and chemical industries highlight the need for this cover as the trend towards holding company directors personally responsible continues to grow.


The company is owed a duty of good faith and you must not make a secret profit, abuse or exceed your powers or breach any confidentiality.

D & O insuranceYou will be liable to compensate the company following an act that is illegal, outside the company’s authority or beyond their power. As a director you owe the company a duty of skill and care and a breach of this duty may give rise to an action for damages against the director.

As a director, you also have a number of statutory duties which can be found in the relevant section of the Companies Act 1985. Accounts, statutory returns, loans and disclosure are a few examples and failure to comply may result in fines, penalties and in some circumstances, imprisonment. Legal duties include compliance with legislation and regulations, for example, employment law, health and safety law etc.

If a director is liable through negligence, breach of duty or trust to the company through failing to exhibit the requisite degree of skill or through a breach of his fiduciary duties, a court may relieve him wholly or partly from his liability to the company (but not to a third party) if he is considered to have acted honestly and reasonably and in the circumstances of the case, ought to be excused. An example would be where the director has relied upon the professional advice that turned out to be incorrect.


Insured Persons

The policy covers past (subject to defined discovery period), present or future directors or officers of the company, any employee named as co-defendant with an insured person, persons acting in managerial and supervisory capacity and persons appointed by the company as liquidator.

The Indemnity

The cover is for legal liability to pay damages, claimants’ costs and other costs incurred with the insurers consent in respect of claims made during the period of insurance.


The Policy is claims made but allows an extended reporting period and run off cover for retired directors that is triggered by non renewal. Includes the costs of representation at official investigations and regulatory proceedings. Limited automatic cover for acquired subsidiaries. Company reimbursement applies where the insured person is indemnified by the company.

The company is indemnified against shareholders costs incurred in pursuing an insured person. Employment wrongful acts are covered by an extension. Outside positions cover indemnifies insured persons while acting in outside directorships.

An excess usually applies but may be overridden in respect of claims which are successfully defended. The limit of indemnity is the aggregate for the period and in excess of any excess.

Territorial limits are usually worldwide but there will usually be restrictions in respect of North America.


  • Profit or advantage accruing to an insured person, to which he had no legal entitlement. Intentional dishonesty, fraud, or wilful violation of any statute or regulation.
  • Prior official enquiries, litigation or circumstances existing or pending at the time of policy inception. Prior acquisition, i.e., any actions of an insured person prior to becoming a subsidiary of the company.
  • Mental or emotional distress.
  • Infringements arising while acting as a pensions scheme trustee.

MAIN CONDITIONSDirectors & Officers Insurance

Any claim or circumstance must be notified immediately or as soon as reasonably practicable. The policy continues if the company or subsidiary goes into liquidation in respect of pre-liquidation risks.

In the event of a change of ownership, the policy only applies to risks prior to the change. Insurers must be advised and cover rearranged as necessary. Any public or private offer of securities must be notified to the insurer, who may amend the policy terms accordingly.

A claims series clause applies

Subrogation applies and the Insurer must be provided with the necessary assistance. Severability, applications for cover are treated as if each insured person makes a separate application. Arbitration, contribution and Contracts (Rights Against Third Parties) Act clauses are included. Insured persons must take all reasonable steps to defend any claim and not prejudice the insurer. Defence costs will be included if incurred with Insurers written consent.

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