If your company has directors or key managers, directors’ and officers’ liability insurance can cover the cost of compensation claims made against them by shareholders, investors, employees, regulators or third parties. 

Directors and officers have specific duties, responsibilities and powers relating to their positions. These are usually set out in their job description or terms of reference. If a director or officer of your company is found to have acted outside of their terms of reference, civil, criminal or regulatory proceedings 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. 

If directors and officers do not have insurance, they face a greater risk of not being able to defend themselves against: 

• Disqualification from holding the position of director  

• Civil proceedings which can lead to hefty legal costs and awards for damages  

• Criminal prosecution which can lead to fines and possible imprisonment 

• Directors’ and officers’ liability does not cover claims made against your organisation as a whole, only those made against individuals for alleged wrongful acts carried out in their capacity as directors or officers. 

You can buy directors’ and officers’ liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA). 

Employment practices liability insurance can be bought as an extension of directors’ and officers’ liability insurance. It covers employee discrimination claims, e.g. for unfair dismissal, harassment, or failure to promote a person.