Insurance thoughts from Berns Brett
Ian McFadyen, Group Sales Manager for Berns Brett Limited highlights the growing importance of Directors and Officers (D&O) Insurance to UK businesses.
Many directors invest considerable time and resources in protecting the assets and liabilities of their limited companies. However, some do not realise that they also incur unlimited liability for their actions in connection with the business.
Being a director, partner or officer of a company brings with it certain responsibilities – towards your employees, customers, stakeholders and members of the public, explains McFadyen.
“If you are accused of misconduct, you are personally liable to defend the claim – and if you don’t have adequate D&O cover, your personal assets are potentially at risk too.”
D&O liability insurance, also known as management liability insurance, offers financial protection by covering the cost of claims brought against an insured individual.
“A common misconception is that alleged misconduct by directors or companies is covered under other liability policies such as Professional Indemnity,” he adds.
“Another is that you only need D&O insurance if you run a publicly traded or very large business. This is not the case. SMEs are just as vulnerable and face exactly the same risks and regulations as their larger peers, but often do not have the support of in-house HR or legal teams to fall back on.”
In an increasingly litigious society, employment practice claims such as wrongful dismissal or sexual harassment can result in astounding settlements. For example, an engineering company was recently ordered to pay an employee £50,000 for failing to follow a fair dismissal procedure.
Your investors also have the right to sue if their shares lose value as a result of a director or company’s alleged misconduct.
“We’re also seeing an increasing number of claims resulting from investigations and fines imposed by regulatory bodies such as the Health & Safety Executive,” says McFadyen.
When you consider the cost of defending, legal action can often run into the tens of thousands of pounds, the number of SMEs still without D&O cover is surprising. Some regard it as an unnecessary expense on top of other company insurance costs, yet D&O claims are not covered under any other policy.
Not having D&O insurance in place may also put off talented individuals from joining a company as they will not be protected.
However, the good news is that D&O insurance is more affordable than ever with policies costing from as little as under £500 per year, according to McFadyen.
Berns Brett, which celebrates its 50th anniversary in April this year, is one of the largest independent insurance brokers in the UK with clients ranging from SMEs, PLCs, charities and public sector organisations through to financial institutions.
The insurance provider specialises in helping businesses to understand the risks associated with their operations and how to control them. This process not only identifies the level of insurance that is required, but also helps to reduce insurance claims – and premiums – as a result.