The D&O policy covers claims against Directors or Officers of a company arising from decisions they make whilst running a company. When triggered by a claim, it does the following:

• Pays the directors legal defence costs upfront, including investigation costs

• Paying settlement costs or awards

• Guarantees access to appropriate legal representation

• Covers civil fines and penalties levied against them

• Provides financial comfort and piece-of-mind at a potentially very difficult time for the policyholder

• Can provide balance sheet protection to the company in certain situations

Ultimately protects the personal assets of the Directors and Officers of a company

Which product?

1. Corporate D&O

Large companies where the Turnover > €100M

2. SME D&O

Small to Mid-Size companies with a Turnover of up to €100M

3. Not-for-Profit D&O

Charities, not-for-profit organisations, clubs & associations

4. Residential Associations D&O

Management companies of apartment blocks and residential developments

Some D&O Claims Examples

1. An allegation of slander was made by a customer against an officer of a company (a clothing retailer). Allegedly comments were made by the manager in public, which supposedly damaged the reputation of the customer. A threat to take the manager to court was made unless a settlement was forthcoming, which was negotiated at €26,500 and covered under the D&O policy

1. EPL – a claim for sexual harassment against an executive of a large company cost over €300,000 to investigate and defend, even though no settlement or award was made.

1. Irish Construction Company, with UK subsidiary – following an investigation, a former managing director of a leading UK construction company was charged with three separate offences in relation to misrepresentation of sales in accounts filed to its parent. Two other individuals, a former Operations Director and Sales Director were charged with fraudulent trading

1. EPL (Employment Practices Liability) – an employee was dismissed for gross misconduct after a violent altercation at work. The company Disciplinary Committee judged he had brought the company into disrepute and their decision was in line with the rules and procedures set out in the company handbook. The employee brought an unsuccessful claim for unfair dismissal against the company. Legal costs of €17,900 were paid

Common misconceptions with D&O Insurance

“D&O is only for those running public limited companies or in very large private businesses”

This not the case. Every director or officer is open to claims. Claims can originate from anywhere – customers, competitors, suppliers, employees, the company itself, regulators and governmental and law enforcement agencies. A good way to frame the conversation is to compare D&O cover to catastrophe cover, something that we are all used to taking out as individuals to protect our personal assets

“We don’t need D&O cover because the directors are covered by the companies limited status”

Many directors assume they are covered by the companies limited liability status, but this is not the case. Shareholders’ liability is limited, but that of the directors and officers is not. Brokers need to point out that the directors or officers own cash, home, pension pot, other personal assets and even their liberty is at stake should a claim occur

“It’s too expensive”

It always comes down to cost, but this can be easily dealt with as adding D&O can be as low as an additional €350. Also, it’s the company, not the individual, that pays the modest premium. D&O cover is not as expensive as it is perceived to be and is always going to be cheaper than the possible alternative!

“It’s too complex” (for both customers and brokers)

As with all things, people are wary of what they don’t fully understand and might reject D&O without fully realising the potential benefits. Underwriting D&O has been hugely simplified from where it was even 10 years ago. For anything less than a public limited company, we only ask for financial information such as turnover and confirmation that they are solvent. It’s often as simple as that.

“It’s not a real risk”

A common misconception made by many directors is that in the event of an incident involving directors, the company will pay their defence costs should an action be taken against them. This may be true in some circumstances, but there are many situations where the company may be unwilling, unable or not permitted to protect their directors and officers in this way.

At Richardson Insurance Solutions we have some of the most experienced and professional brokers in the industry.  If you wish to discuss any of your insurance needs, please contact our office on 012999501 or e-mail info@ril.ie

This presentation is courtesy of Zurich Insurance Company Ltd

Richardson Insurance Solutions DAC t/a Richardson Insurances and Richardson Insurance Financial Services is regulated by the Central Bank of Ireland.

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