Directors’ and Officers’ Liability Insurance
The policy will usually offer indemnity against wrongful acts committed by the directors in their capacity as directors.
Directors and officers owe duties to their companies.
If there is a breach of duty on their part, which causes damage to the company, they can be sued and held personally liable for the damages.
Claims can be brought by shareholders, a financial institution or on a Director versus Director basis.
Liability may arise out of lack of care and skill in the performance of a director’s duties for example negligent advice or misstatement, particularly in the context of a merger or takeover when failure to understand economic trends results in a poor forecast of the company’s performance.
Any act which goes beyond the limits of the company’s constitution (such as excessive borrowing), unauthorised payments (however innocently made), failure to disclose the full extent of the directors’ interests or a failure to comply with requirements, may involve a director or officer in a personal liability.
Liability may also arise out of failure to arrange proper insurance e.g. public liability or products liability covers with inadequate indemnities.
