Directors & Officers Insurance: A Business Necessity

There has never been a more important time to make sure that those senior individuals, either running or representing their organisation, are fully protected against claims made against them for the mismanagement of an organisation.

Whilst it may well be a very satisfying moment for new Directors or Trustees to join the Board, they are also obliged to accept new and potentially onerous responsibilities. If a Director (or trustee) is believed to have breached their responsibilities or duties by any one of a number of internal or external stakeholders, it can have significant consequences. The judicial system is easily accessible and even if an action doesn’t reach the courthouse, Directors can find themselves seriously out of pocket.

Those with responsibility can find their personal assets at risk – including their own home or savings – but there can also be severe reputational damage. Given the new legislation around General Data Protection Regulations (due in 2018), responsibilities will continue to increase. Directors need to remember that if they are fined or have costs awarded against them, they cannot recharge this to the business and it becomes a personal liability.

Directors and Officers (D&O) policies have been around for many years and the number of organisations that purchase cover has increased significantly over the last few years. However, not all organisations purchase cover and continue to ignore the potential risks. Given that the cost of D&O has dropped significantly over the last few years, it is harder to justify to a Board why cover hasn’t been purchased.

Employment claims are on the increase, particularly with employment legislation becoming more complex and changes to the rules around employment tribunal costs. Alongside this, breaches of Health & Safety legislation can also have serious repercussions on a Director who may just be acting on third party advice, despite their ultimate responsibility.


Potential claims against Directors can come from a number of areas under the general heading of “mismanagement of the business”.

Regulatory investigations are also becoming more common and with the impending introduction of the General Data Protection Regulation in 2018, Directors need to be absolutely certain they are protected by a robust D&O policy with a dependable insurer.

D&O insurance is designed to protect Senior Executives (or those acting in that role), from the financial implications of a legal action against them, whilst they are carrying out their duties as a Director or Officer of the business. The policy will pay for the costs of defending a claim up to and including any court action and also any compensation that is awarded.

While the core insurance cover is the same amongst insurers, not all policies are equal and the devil is in the detail. It is vitally important to check endorsements and exclusions to ensure you are properly covered.

D&O cover is here to stay and will provide comprehensive protection to allow Directors to carry out their daily tasks and responsibilities without the fear of personal financial disaster.


To discuss further please contact Tim Mackenzie on 0131 322 2632 or email