Why is it now more than ever so important to have Directors and Officers Insurance?

Within any organisation, limited company or charity etc Directors and Officers can be held liable for any decisions or actions taken on behalf of the organisation.

It is now more than ever so very important to consider Directors and Officers Insurance which provides protection covering legal costs and claims that may come following allegations of error, wrongful acts, negligence, etc.

It has also been known more recently for Senior members to be held accountable for problems occurring within the organisation or charity, such as cyber-attack, financial failings and environmental issues. This making the need for D&O insurance so much appealing.

There are many factors causing the increase in D&O claims, so let’s explore a few.

One of the main issues currently is event driven litigation, these claims can occur following product problems, for example recalls, false advertising and product malfunctions. These kinds of claims can also come from allegations of corporate corruption or an inadequate response in a natural disaster.

In most instances the director or senior leader is held to personally account for failure/alleged failure to implement reasonable controls to prevent the incident or the inability to provide an effective response plan to minimise damage.

Another popular case is those associated with cyber security and data protection following how many organisations are now almost or completely reliant on tech to run their organisation, charity, support group, social enterprise etc. With this major overhaul within organisations over the recent years it is now vital to ensure cyber security is addressed to prevent a cyber-attack. It is required under the General Data Protection Regulations (GDPR) that organisations, social enterprises, charities etc and their directors/leaders to carry out specific actions to prevent and respond to any form of cyber-attack. Failure to do so can result in major non-compliance consequences.

As a result of this, many charity directors, social enterprise trustees and the like are being held responsible for maintaining effective cyber security and data protection procedures.  

Following the results of the Covid 19 pandemic and the war in Ukraine there has been continuing difficulty with the economic environment, pushing inflation and supply problems. Some organisations, charities, voluntary groups and social enterprises are facing financial difficulties as a result of this and can become the target of personal litigation by other directors, trustees or volunteers.

Organisations are now fully expected to allow and implement policies to ensure equality and diversity throughout. Alleged and proven failures in this area are resulting in litigation from external sources and employees or volunteers against directors either collectively or individual.

These main trends that have arisen, showing the risks and reasoning on D&O insurance also allow additional support to be obtained where needed. There are many fines, costings, and damages that can be associated with this form of litigation causing it to become financially draining. D&O cover should be a vital element of any organisations, charities, or social enterprises insurance portfolio.

Let’s have a look at where to start.

First things first, start negotiations with your insurance broker to support them in obtaining the best terms possible. Keeping an open and up to date relationship with your broker is first and foremost the most important aspect with any form of insurance you require as it allows the broker to relay all the relevant information to the insurers and ensure your organisation has the correct level of cover. Making sure your broker is informed of any changes in your organisation’s structure or operations to allow new risks to be identified.

Currently most insurers are requesting more and more information from non-profit organisations, charities, social enterprises and the like to give them the fullest picture of risks and cover needs. Starting the renewal process early is important to give you, the broker and insurer enough time to give and process the facts and figures before presentations and quotations are then released.

And lastly on our list of things to consider is risk management. Your organisation requires policies and procedures in place the make sure all involved are evolving along with the regulatory requirements. Also remember, keeping appropriate policies and procedures in place is necessary, but not always enough. It is equally important to ensure that there are processes in place monitoring that these are followed, and compliance is documented in the correct manner.

For any further information, advice and/or support in this matter please contact our dedicated team on 01909 565858.