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Safeguarding Company Directors and Managers: Examples of D&O claims

Senior managers and directors spend their days making decisions and they do so in a tough climate of increasing regulation and litigation covering corporate governance and risk management. To prevent them being stifled in their decision-making, and potentially held personally liable for any losses suffered by the company or any third parties, Directors & Officers Liability (D&O) insurance has become a pre-requisite in corporate risk management.

D&O insurance covers the cost of any compensation claims for alleged wrongful acts committed by a company’s directors or key managers (officers), such as negligence, failure to comply with regulations or laws, reporting errors and such like.

Examples of D&O claims

Regulators such as the Office of Fair Trading, the Inland Revenue and the Health & Safety Executive (HSE), as well as shareholders, investors, creditors and individuals, including employees, directors and even co-directors and other company officers, can all bring D&O liability claims. Policies can also be extended to cover employee discrimination claims, such as unfair dismissal or harassment.


  • Defamation – the owner of a company makes a claim for defamation after comments, made by the managing director of another, questioning the owner’s propriety, are published in two newspapers.
  • Negligence - the co-directors of a company make a claim against another director following a devastating fire at the company’s premises and the discovery that the director responsible for arranging insurance has failed to keep the policy up-to-date, causing a shortfall in the payout.
  • Misleading information – two company directors are disqualified for financial irregularities after their company goes into receivership and it is revealed that overstated company accounts prior to a public share offering inflated the purchase price of the shares.
  • Failure to comply with regulations – a road accident reveals that a vehicle operated by a waste management company was not roadworthy and both the company and the transport manager are prosecuted.
  • Health and Safety – a company and its directors face a compensation claim, brought by the HSE and the family of an employee, when the employee is involved in a fatal accident at work.
  • Pollution – a company is prosecuted and found to be in breach of the Water Resources Act 1991 after it is discovered that oil was seeping into a nearby lake from fractured underground pipes belonging to the company.
  • Unfair dismissal – a company director faces a claim for unfair and constructive dismissal by a former employee, who alleges he sexually harassed her both at work and outside of working hours.

These are all illustrations of the types of cases that can be brought against individual managers and directors, which D&O liability insurance would cover.

It does not, though, cover cases of fraud, intentional non-compliant acts, illegal remuneration or personal profit, property damage and bodily harm (except corporate manslaughter).

The D&O safety net

Multinational and large organisations, those with the highest risk of attracting D&O claims, regularly protect their managers and directors with D&O insurance. Nowadays though the directors and managers of small-to-medium-sized enterprises are probably just as vulnerable to such claims. However, estimates have it that just 27% of SMEs in the UK have D&O insurance.

Here are a few examples of the costs of fighting cases that could be covered by D&O Liability Insurance. Take a look and then decide if D&O insurance is something you can afford to go without:

  • A £50,000 settlement and defence costs in a case of sexual discrimination and harassment
  • Defence costs of £16,000 against a claim of negligence
  • £32,000 in a defamation case
  • £100,000 to defend two directors accused of trading while insolvent and facing disqualification
  • £890,000 worth of defence costs in the case of an MD and several managers facing criminal charges for alleged breaches of H&S legislation
  • £7 million in costs and settlement fees in the case of directors accused of providing inaccurate financial statements to bankers

Find out more about how Edward Hayes LLP can help with all matters relating to Directors and Officers’ Liability by contacting us now on 01243 781431 (during office hours) or 0800 085 9684 out of hours or via email on

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