For years, directors & officers have relied on their companies to provide adequate D&O insurance to protect them against 'wrongful acts'. However unprecedented levels of corporate litigation & bankruptcies has left some D&O insurers reeling from high payouts & searching for ways to limit their liability. This has exposed the personal assets of directors according to a recent survey, with some directors claiming liability coverage as the key reason for not pursuing further non-executive roles.

Shared Liability

The survey points out that a high number of UK directors are covered under 'Shared Liability' policies, where D&O insurers have extended their coverage to include not only individual directors and officers, but the company itself. Under this arrangement, directors are forced to share the policy limits with the company - so if both the company & officers are named in a lawsuit, the officers' coverage may be reduced to accommodate the business' general liability.

Void Policies

Another issue is that D&O insurers now retain the option of voiding a policy if a single officer or director provides falsifies information or omits important information on the application. That means that non-exec's could find themselves without coverage through absolutely no fault of their own.

Its become clear that many D&O policies are limited in their ability to provide the protection they promise. With evolving legislation and stricter corporate governance standards, directors face greater personal liability than ever before. The time has come for directors to take steps to protect themselves, with coverage designed to protect their personal assets.