Directors' and officers' liability insurance – protecting your personal wealth
As the director or senior officer of a company a lot of responsibility rests on your shoulders. You have to make the most important decisions about the direction the company takes and are ultimately responsible for its successes or failures. Directors are also usually held accountable for things like fraud, health and safety issues, negligence, data protection, and even staff-related problems like sexual harassment cases, which can end up costing a company hundreds of thousands if they go to court. Essentially, directors’ and officers’ liability insures the ‘behaviour’ of the senior members of the company as it is their judgement or decisions that may lead to shareholder discontent and then, in turn, a lawsuit.
With directors’ and officers’ liability insurance in place, you as a director are protected personally if a claim is made against you and damages are sought. However, it’s important to bear in mind that you’ll only be covered if you made an error of judgement or ‘accidentally’ acted outside your remit as a director. If you were found to have acted deliberately then your insurance may not cover you and your personal wealth, as well as that of the company may be at risk.
If you’re the sole director of the company or you’re still quite a small operation then this type of insurance may not be a priority, but as the company grows and you have a responsibility to shareholders it’s something you should definitely consider. Having worked hard to build your business and make it a profitable and successful enterprise, the last thing you want is for its profitability and your personal wealth to be at risk should your judgement be called into question.
