Directors’ & Officers’ Insurance

Directors’ & Officers’ insurance (D&O) is a personal insurance purchased by the employer for the benefit of its directors and officers. ITIC’s D&O product protects both individual directors from claims against them in person and also the company that has to indemnify these senior staff. 

D&O claims can come from:

• Third parties
• Shareholders
• Staff
• Regulatory authorities

Redundancy Requirements

A marine and transport services company made the difficult decision to reduce the number of its staff. Business volume had declined and this was the only way forward. On receiving notice from the company, several members of staff consulted an employment lawyer and subsequently began a legal action against the company and the individual directors responsible for their dismissal.

At the same time, a member of staff who had also been dismissed began a separate legal action. Her allegation was that one particular director had always discriminated against her on the grounds of her being female and of a different religious faith. She considered that this was the reason why she had been made redundant.

D&O underwriters were approached and lawyers appointed to defend the allegations against the individual directors. An allocation of costs was agreed for the defence of the company (not itself insured under a D&O policy) and the defence costs for the “insured persons” i.e. directors. At the subsequent employment tribunal, the individual directors were cleared of any wrongdoing and the company reached a settlement with the former employees. Despite the outcome the D&O defence costs for the individual directors were significant and were met by the policy.

Company Registration Wrangle

A company director received a letter from the governmental authority responsible for overseeing the annual registration of company accounts.

The letter suggested that the director had submitted incorrect information and a fine was likely. An enquiry began. With the agreement of D&O underwriters, assistance was provided by a firm of consultants to show that no such breach of regulations had occurred.