Directors & Officers Liability Insurance (D&O) is now considered a crucial form of protection for all organizations, and is often a requirement before investors and board members risk their personal assets to serve your company.
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. D&O can help to protect the personal assets of individuals and, crucially, to cover the costs of their defense.
Directors of all companies are now held, at an unprecedented level, to be personally responsible for actions and decisions they make on behalf of the company - putting their personal assets at risk if those decisions are tested in the courts.
How does D&O insurance operate?
The policy reimburses directors and senior managers against claims made against them personally. In addition, the insurance can also protect the business where the company itself is joined in the action. Coverage is also provided for legal fees, professional charges and expenses incurred by an insured person who faces formal investigation by a government body into their affairs or the affairs of their company.
Where do claims come from?
Case Studies
Activism by shareholders, criminal prosecutions, investigations by vigilant regulators and employment disputes are all on the rise, and even non-exec directors are feeling the pressure. It’s not just the blue-chips who need to worry – managers & directors of SMEs are exposed too.
Health & Safety
An employee is involved with a fatal accident at work. The OSHA and the heirs to the employee’s estate bring legal action against the company and the directors personally for compensatory damages.
Shareholder Action
A minority shareholder brought action against the former directors of a property management company after they sold it. He alleged they had failed to obtain fair value for the sale of the company and demanded the directors make good the shortfall.
Financial Irregularities
Two directors were disqualified after actions by the secretary of state when financial irregularities were uncovered when the company went into receivership. The accounts were overstated prior to a public share offering, which led to an inflated share purchase price.
Misleading Statements
A competitor claims a board member has released misleading statements tarnishing their reputation. They issue legal proceedings against the company and the director individually for libel damages.
Inappropriate Adavances
An employee accuses a director of inappropriate advances after a business dinner celebrating clinching a large contract. The employee brings the action against the director personally.
Share Disposals
A share price plunge follows a profits warning. It is subsequently discovered there were numerous share disposals immediately prior to the announcement – all the directors face an investigation and the external shareholders sue for their losses.
If your company operates overseas, there’s also a raft of further legislation including EU directives. If directors make frequent business trips to the UK, adequate D&O coverage must be in place to provide legal representation & extradition protection should they be detained by UK authorities.
D&O Insurance can be bought as part of a portfolio of insurance to keep your costs down.
Property: computers, audio visual equipment, offices
Consequential Loss: protects income streams during physical and technological disruptions (fire, flood, power & telecommunications failure)
General Liability: cover for compensation payments arising from damage to third party property or personal injury
Workers' Compensation: for injury and illness to employees and freelancers
Errors & Omissions: helping to defend you against allegations of libel, slander, infringement of copyright, breach of confidentiality
Directors' & Officers' Liability: protecting decision-makers against alleged mismanagement of the organization
Travel & Touring: trip cancellation, medical expenses, passport replacement, loss of baggage
Specialist Cancellation Insurance: cover against financial loss as a result of cancellation, abandonment, postponement or re-scheduling of an event. As an artist manager, you can opt to insure your highest earning artists/authors with a “friends and family” type policy – entirely flexible and designed to cover areas where your income is most vulnerable - without breaking the bank. Some problems are worth losing sleep over. We believe insurance isn’t one of them. More >
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The arts present a very specific set of risk exposures – and now your digital and online risks can expose you globally. We understand the risks and pressures you face - and we speak your language. We’ll support you with great advice - helping you make good decisions for your organization.
Our policies can help streamline costs, and we’ll always help you stay ahead of the game in managing risk. The show must always go on - insurance isn’t just about processing a claim, it’s about thinking laterally to solve challenges and problems fast.
At La Playa, we’re passionate about the arts and creative industries – many of us are practitioners and active consumers; in fact, La Playa founded the first ever corporate art collective!
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