WHAT DOES IT COVER
Legal defence costs, and in certain circumstances civil fines, and penalties imposed by an official body, resulting from claims made against individuals (not the company as a whole) for alleged Wrongful Acts carried out in their capacity as a director or officer of your company.
WRONGFUL ACTS INCLUDE
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breach of duty including breach of trust
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negligent act, error, or omission
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defamation committed in good faith
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breach of warranty of authority
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negligent misstatement or misleading statement
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It may also cover the cost of defending civil, criminal, or regulatory proceedings
WHO DOES IT COVER?
As well as current, most policies cover future and past directors and officers of a company and its subsidiaries, including non-executive directors.
A director has its own legal definition.
An officer of a company is someone who holds a position of authority in your company and is responsible for managing its affairs.
TYPICAL CLAIMS SCENARIOS
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Claims made by shareholders and investors that hold you responsible for losses
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Accusations of wrongful trading brought by liquidators
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HMRC investigations into your tax payments
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Health and safety investigations by the Health and Safety Executive (HSE)
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Investigations by the police or Serious Fraud Office
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Claims brought against you due to alleged errors in administration, particularly around pension and employee benefit
SOME SPECIFIC EXCLUSIONS
Deliberate acts, fraudulent and or criminal conduct, insider trading or embezzlement for example are not covered.
Atticus, The Insurance Solution
OPTIONS OF COVER
D&O generally has three main cover options (known as Sides)
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Side A covers claims against individual directors and officers where the company cannot indemnify its directors or officers themselves, thus protecting the individual’s personal assets
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Side B is for the benefit of the company, where it does indemnify the director/officer, Side B provides reimbursement for the company
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Side C is entity cover for publicly traded companies – covers claims against the company itself for securities claims
If the claim is covered, the insurer pays for the defence costs.
If the claim is covered and the case lost, the insurer pays for the loss and defence costs
D&O insurance is classed as a tax-deductible expense for companies: EIM30509 – Deductions: directors’ and officers’ liabilities: amounts on which relief due – HMRC internal manual – GOV.UK (www.gov.uk)
EMPLOYMENT PRACTICES LIABILITY (EPL)
Covers the company against claims made by employees alleging various employment-related issues, such as harassment, discrimination, wrongful termination, failure to promote etc. EPL can often be purchased as an extension to D&O insurance.
Note: As always… insurance policies and claims are subject to terms and condition of the respective insurance policy…
EMPLOYMENT PRACTICES LIABILITY (EPL)
Covers the company against claims made by employees alleging various employment-related issues, such as harassment, discrimination, wrongful termination, failure to promote etc. EPL can often be purchased as an extension to D&O insurance.
Insurance companies and their policies are not all the same, so always refer to your own insurance documents. We are here to help you and help you understand your insurance. If at any time you are unsure of anything regarding your insurance policy and the cover it provides, please do not hesitate to speak to us.