Wondering what D&O is and why you may need it as a non-executive director? Find out in our latest blog
What is D&O and why do I need it as a non-exec?
Taking on a non-executive role is an exciting prospect, however, it is important to remember that you share the same liabilities as a full-time executive director. Ensuring you are protected if a lawsuit is brought against the directors and officers of a company is vital. The number of employees, shareholders, competitors and regulators that are suing businesses when they believe 'due care' has not been exercised is on the rise, so you need to be proactive and ensure you're covered.
What can you do to protect yourself as a non-executive director?
Before joining a board, you should check that the organisation has Directors and Officers (D&O) insurance. D&O is something that corporations, SME's and non-profit organisations should have taken out to protect their directors, so before you take on your next role, ask to see and review their D&O policy. The vast majority of businesses do have D&O insurance as they know it helps to attract and retain directors and protects them front the sizable costs associated from lawsuits arising from D&O. Most firms also recognise that without D&O, they risk going bankrupt or struggling to recover from such losses, but it is always worth checking.
D&O insurance is intended to protect independent directors from personal losses if they are sued or accused of wrongdoing. The insurance helps cover defence costs and damages (awards and settlements) arising as a result of wrongful action.
What am I covered for?
Directors & Officers insurance provides cover for a wide variety of claim types. This insurance will also pay to defend against frivolous claims made without integrity.
While personal claims or proceedings against non-executive directors can arise from any decision made, or acts carried out, here is a list of possible claims that Directors & Officers insurance typically covers.
What am I not covered for?
While D&O covers a lot of different matters of wrongdoing, like any other insurance policy, there are exclusions. D&O does not provide cover for malicious acts of wrongdoing, such as; fraud, dishonesty, criminal or pernicious acts committed deliberately. It also does not cover personal or bodily injury or damage to property.
Why do I need it?
D&O insurance covers costs associated with the defence of and allegation of a wrongful act. This means it takes away the financial risks faced by non-executive directors, giving you protection should an allegation or claim be made against you. Considering that even simple investigations can cost thousands, if not hundreds of thousands of pounds, ensuring the businesses you work with have D&O insurance takes away a massive personal financial risk.
While you shouldn’t have to worry too much about liability as long as you perform your due diligence in all your board duties. If you are negligent and don’t fulfil your duties and responsibilities appropriately you could be liable for any loss. To ensure you’re effectively performing your duties, In Touch has created a handy due diligence checklist to help you. Click here to download it.