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| Whilst not part of our core business, Saturn does participate in the provision of Directors & Officers (D&O) Insurance, our target market being SMEs, Residents Associations and the like. |
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Directors & Officers cover is generally purchased by Public or Private Limited Companies. Additionally, the cover may be of benefit to some Partnerships, such as Accountants, where individuals may hold ‘Outside Board’ Directorships.
The cover provides directors, non-executive directors and officers with an indemnity against a wide range of potential legal actions which they can face in the course of carrying out their normal duties and which may put their personal assets at risk. In certain circumstances, a director or officer may be held personally liable for a breach of a duty of care, skill or contract with the potential for unlimited financial liability.
The law regarding the duties and responsibilities of directors is to a large extent derived from case law. In addition, there are specific duties placed on directors by the Companies Act and various other statutes. A breach of these duties can result in unlimited personal liability or the application of criminal penalties, including imprisonment. Directors’ duties and responsibilities in law can generally be stated under three headings: |
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 | Fiduciary duties
| | The duty of skill and care
| | Specific duties
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| The duty to act in what the director believes to be the best interests of the company.
| | The duty to exercise powers only for the purpose for which they have been given.
| | Trusteeship of the company’s assets.
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| The Duty of Skill and Care |
| This is based on the law of negligence. In general, a director: |
| Need not apply to his duties greater skill than it is reasonable to expect of a person of his knowledge and experience.
| | Must take such care as an ordinary man might be expected to take on his own behalf, but need not give constant attention to the company’s affairs.
| | May rely on those to whom tasks are delegated to carry them out, in the absence of any grounds for suspicion to the contrary.
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| These standards are based on case law from 1925 and are therefore considered to be, at best, the very minimum standards that should be applied. Certainly, directors of public companies, or those with a serious risk of insolvency, should be wary of relying on these propositions as they may find themselves to be held to much higher standards when a difficult case is presented to the courts. |
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In addition to common law duties, there are numerous duties imposed by statute. The Companies Acts of 1985 and 1989 alone set out more than 200 possible offences. There are many other acts, two of the most onerous being The Insolvency Act 1986 and The Company Directors Disqualification Act 1986. In addition, there are well over 40,000 EC Regulations.
Claims can be brought against a director or officer by many parties including, but not exclusively, the company in respect of a breach of duty, shareholders, regulatory bodies, EU Commissioners, The Dept of Trade and Industry, company creditors, The Official Receiver and anyone suffering a loss as a result of a breach of warranty of authority to contract on the Company’s behalf.
Cover is provided up to a monetary limit for the aggregated value of all claims notified during the period of insurance, the amount being agreed when the policy is taken out (although it can normally be increased during the policy term or at renewal with our consent and for an additional premium). This is known as the Limit of Indemnity. The limit that is right for you will depend on your individual circumstances. If you are in doubt, you should speak to your broker for guidance.
Policy cover will also extend to include legal costs which arise in the defence of the claim against you. Such sums are included within the Limit of indemnity provided.
The extent of the cover provided will normally include: |
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| Damages, judgements or settlements.
| | Costs and expenses awarded against a Director or Officer.
| | Legal Defence Costs.
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However, cover can vary from policy to policy and insurer to insurer and so it is important to ensure that you have the cover that is right for you. Additionally, as with all insurance policies, certain terms, conditions and exceptions will apply. It is important that you appreciate how these factors may affect you. Your broker will be able to give you guidance on this.
Directors & Officers Liability Insurance is different to most other insurances in that it operates on what is known as a ‘claims made basis’, meaning that the policy will only provide cover for claims or circumstances discovered and notified to the Insurer during the period of insurance, not errors or mistakes occurring during the period of insurance.
Director’s & Officers Liability Insurance policies generally contain a Retroactive Date, which is normally the date that the policyholder first effects cover. Claims or circumstances arising from activities carried out before this date are not covered, irrespective of when discovered and/or notified…..it would be inequitable to expect an insurer to pay for claims arising from activities undertaken many years previously and for which no insurance was arranged at that time. However, through Saturn you will normally be able to ‘buy-back’ cover for earlier work for a single, one-off additional premium. The Retroactive Date itself will move with the policyholder from one insurer to another, thus ensuring continuity of cover. |
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| To download a Proposal Form or specimen Policy Wording, please click on the relevant link below: |
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Directors & Officers Wording
