The Importance Of Directors And Officers Insurance

Directors and officers of all companies, both small and large

, are at risk of the possibility of facing high legal costs due to claims being filed against them. These top ranking business personnel would have to finance the legal fees themselves if they happen not to have the proper type of insurance.

Director and officers insurance is designed as a way to protect these individuals in case a claim is made against them as a result from an actual or an alleged wrongful act on their part, which was done while carrying out their roles. In today's highly competitive business world, everyone from shareholders to regulators are placing an increasing amount of importance on decisions being made by directors and senior members of management teams. Furthermore, these people often file claims against high ranking officials within a company as they are more than willing to penalise the individual instead of the company they represent. Once a claim is actually filed and set into motion against a director or an officer, these business heads are often left to face very high legal costs that could spell financial ruin if it were not for insurance.

Every officer and director is responsible for carrying out a wide range of duties in connection with the position they hold. In most cases, the job duties are clearly outlined in the job description that was drawn up for the particular position they holds within the company. This type of top ranking professional can be held directly responsible for such things as health and safety, data protection, maintaining accounts, fraud and negligence. In the case that a business director or an officer is thought to have acted outside of their job description, they are often faced with having to deal with allegations of wrongdoing brought on by outsiders. Quite often legal action pursues wherein the individual may be held accountable for paying thousands of pounds worth of damages. This is where directors and officers insurance comes into play. Should they lose the case, the insurance policy will pay the legal fees.

This type of insurance coverage can also extend to covering defence costs that may arise resulting from criminal and/or regulatory investigations and trials. It is actually quite common that civil and criminal actions are filed against heads of companies at the same time. Not only do shareholders and regulators frequently file claims, so do customers. Direct competitors also tend to seek legal damages based on unfair business practice allegations or anti-trust charges.

In order to protect yourself, as well as your company, getting adequate coverage is vital. One of the best ways to find an appropriate policy is to speak with an insurance broker to find out what level of coverage is right for you. You can select a broker on the British Insurance Broker's Association (BIBA) website if you wish, or use one of the many other insurance comparison websites that allow you to read about the different policies and compare rates. If you would rather deal directly with an insurer, be sure to check to see that they are a member of the Association of British Insurers or ABI.

by: Paul Delaney

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