Directors and Officers Insurance

Only a few more days of electioneering to go and if the party leaders are to be believed the country is going to rack and ruin (unless of course they win). Fortunately they can usually be relied on to get things wrong, but more worryingly we do need one to be right!

That is possibly a tall order given that we seem to have the choice of the least worst rather than the best party leader and whilst there are some decent local constituency MPs, (with few exceptions) those promoted to cabinet level must take an ‘out of touch with reality’ pill, or do they just seem to pick the ones who have never had a proper job.

The difference between the ‘Westminster bubble’ and the real world is startling. Forget that politicians rarely answer straight questions, over the years successive Governments have presided over numerous fiascos that they would not get away with in the wider business world.

There has been continuous mismanagement of the likes of the Child Support Agency, immigration and will HS2 ever be built or high speed? We currently have no aircraft carriers and the right planes won’t be ready when they are finally built. If you think Gordon Brown was a financial genius read up on Metronet (the waste is breath-taking) and has Cameron’s bombing of Libya exacerbated the unrest in North Africa with the resulting desperate attempts of migrants trying to reach Southern Europe that we have seen in recent weeks.

As a general rule, when you cock-up your boss doesn’t stand by you (almost) to the bitter end saying you are the greatest ever. In most professions, unlike Ministers and The Chancellor, you have to be qualified for what you do. Not often can you lie, bomb the hell out of a country and then become a peace envoy.

Whilst our party leaders were happy to bribe the voters of Scotland on the eve of the independence referendum, if a business were to overstep the ‘hospitality’ mark when competing for an overseas contract, the directors would no doubt feel the full force of the Government’s new Bribery Act.

Government Minister Oliver Letwin dumped official papers in a park bin and received a ‘whoops never mind eh’ slap on the wrist. Don’t expect such lenient treatment if you breach the Data Protection Act.

Away from Westminster there are real consequences of making mistakes. In the real world company directors have to take responsibility for the decisions and actions taken in running their business and face unlimited personal liability. The limited liability protection of a company only applies to the shareholders.

As a director you are legally required to act with care, in good faith and within the law. You have a duty to act in the best interests of the company, including a responsibility to ensure that other directors and officers do likewise. If you don’t, you face a fine, imprisonment and/or compensation for damages that could involve the seizure of personal assets. And it is not just directors that face claims, company officers and senior managers also have a personal liability for their actions.

Claims can come from many sources, but as an example there are over 200 ways a director can incur fines or penalties under the 2006 Companies Act alone, so Directors and Officers Insurance is vital to protect against the cost of defending an action and any civil damages awarding against a director or officer. If you Google Director and Officers claims, you will find numerous examples. With some you will have little sympathy, but others should make you realise the extent to which the law requires you to have control of your company.

For example; when a lorry driver fell asleep and killed two motorists, a court held that not only the operations director, but also a co-director should have ensured their driver adhered to the relevant driving regulations. The directors incurred substantial defence costs before both were convicted of corporate manslaughter.

Directors and Officers has become a ‘must have’ cover for most businesses and is generally available at a relatively modest cost. Politicians need not apply.

Call Alan Body on 01903 520200 or email alan.body@nsure.co.uk for more information about Directors & Officers Insurance.