Directors’ and officers’ liability insurance is designed to cover the cost of compensation claims made against your business’s directors and key employees/managers (officers) for alleged wrongful acts.

Wrongful acts can include:

  • breach of trust or duty
  • accounting irregularities
  • corporate manslaughter
  • wrongful trading
  • breaches of competition law

Do I need it?

Directors and officers have specific duties and responsibilities , which are usually set out in their job description or terms of reference, that are related to their positions within the business. Should a director or officer of your company be found to have acted outside their terms of reference or job description, proceedings of a criminal, regulatory or civil nature can be brought against them.

Directors’ and officers’ liability insurance covers the cost of defending these proceedings, as well as any compensation costs that arise from an unsuccessful defence.

A couple of claims examples are:-


Two directors of a manufacturing company found themselves with claims made against them for misrepresentation. As part of an effort to make funding available for the acquisition of a new subsidiary, the company sold some land; which upon its subsequent purchase unfortunately proved to be contaminated. The developers who bought it therefore began proceedings against the two directors who now faced the prospect of having to compensate for the costs associated with the land’s clean-up, the delay in development and other damages.

The defence costs of the two directors exceeded £70,000 afforded under their ML Policy

Companies Act

The managing directors of a now insolvent company were thought to have been in breach of the Companies Act due to an alleged administrative oversight made two years previously. The Companies Act required them to hold sufficient distributable reserves when making dividend payments. The liquidators, however, alleged that an excessive dividend payment had been made to shareholders in the past and brought a claim against the directors who therefore would have to pay back the excess sum.

The managing directors incurred legal costs of up to £75,000 afforded under their D&O Policy.

If you would like to receive a quote for this, or other commercial insurance, please contact our insurance guru Sarah. E-Mail or call 01229 813388.

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