Even the most experienced and established directors can be personally sued for oversights, which is why your business needs to take out comprehensive cover.
With a director liability insurance policy in place, you can rest assured that you will be protected should incidents occur.
Quite simply managers can make mistakes – and are often personally legally liable for them. No matter how prudently managers act and how strong their business acumen is, any manager’s decision can result in losses for the company or a third party, and the directors and officers who made those decisions can be held personally liable for those losses and can be involved in costly litigation.
No matter which type of liability insurance in New Zealand you choose, it's essential to pick a policy that is tailored to your specific needs. Every company is different, which is why you can't afford to take any chances when it comes to your directors and officers cover.
What is directors and officers liability insurance?
A company needs to ensure that it’s directors and officers have the room to make decisions. D&O insurance supports good corporate governance by making the risks of these decisions manageable. When a claim is made a D&O policy will pay for defence costs and financial losses so the cover gives the director or officer a certain amount of financial security.
Finding the ideal policy involves looking for a provider with a wealth of knowledge, as well as experience of the liability sector. This way, you will have peace of mind that your provider will pay out if you need to make a claim.
Legal cover can easily cost thousands of dollars, which is why there's no substitute for having directors and officers insurance in place. Few companies would find it easy to get back onto their feet following an extensive legal case, so it's advisable to take proactive steps such as taking out directors and officers cover.
Who is covered by director liability insurance?
There are certain parties who will be covered by the directors liability insurance policy you choose to take out. It's important to be aware of the specifics of your individual policy, as they may change from provider to provider.
Generally speaking, every current director or officer of your company will be protected. It's also possible that past directors and officers will likewise be covered be the policy. Once D&O insurance has been taken out, it will also provide protection for future directors and officers of your company.
This type of insurance will reduce some of the risks associated with day-to-day business life. It frees up directors to act as they see fit in specific situations and provide guidance knowing they are protected if they are personally sued.
What are the restrictions of my director insurance policy?
Directors and officers who are engaged in illegal, fraudulent or criminal activities will not have their actions covered by this type of professional indemnity insurance.
It is also worth bearing in mind that the policy will only provide cover for any incident that begins once the directors insurance has been put in place. Mishaps that occur before the policy start date will therefore not be protected under the director insurance.
Common reasons for directors and officers insurance claims
Some claims made under directors insurance are more common than others. Insurers often find themselves up against certain situations and among them are:
- Directors being personally sued for advice they have given
- The actions of company shareholders
- Inaccurate company accounts
- Employee-related defamation
- Reporting errors
- Wrongful termination of employee contracts
The specifics of your policy will depend on the type of directors and officers cover you have signed up for. This is why you need to discuss the ins and outs of the product with your insurance broker before coming to any final decision, and making sure it is suited to your individual business needs.
Applying for director liability insurance
Rothbury has over 60 years' experience in paring businesses with their ideal professional liability insurance in New Zealand. If you recognise the benefits of having directors liability insurance, then be sure to get in touch so we can provide you with a quote for a tailored policy.
We recommend that you contact us to discover more about the different types of cover that we offer, including director liability insurance.
