The legal climate for directors, officers & non execs in the UK is becoming increasingly hostile. In recent years, both the government and shareholders have become more willing to bring actions for breach of duty against directors and officers of companies. Here's five reasons why you should consider buying personal D&O insurance.

Personal Liability

A common misconception is that directors of limited liability companies can hide behind the veil of incorporation. This is not the case - directors' personal liabilities are unlimited and in the course of carrying out everyday duties for a company, directors are exposing themselves personally to lawsuits, investigations and criminal prosecutions. Without insurance, directors personal assets are put on the line & can end up having to re-mortgage (or worse), just to pay legal fees.

Criminal Liability

Directors could go to prison, for their actions, inaction or ignorance. The very best defence can be invaluable, but very costly. Directors & Officers insurance cannot cover the criminal penalties - that is against public policy - but it can cover the cost of defending a claim up until the guilt point is established.

Investigations

Its become very easy to complain about a company. Since 1993, actions against directors by the Department of Trade and Industry (DTI) have increased by over 400% - with an increasing focus on smaller businesses. The DTI is not alone, investigations through other government bodies like the Health & Safety Executive (HSE) & the Serious Fraud Office continue to escalate. Even when there is no initial allegation that a director has done anything wrong, having the funds to obtain legal representation at these investigations enables directors to gain the best possible outcome.

Director Disqualification

A total of 1200 directors were disqualified in the year to March 2007. Disqualification stops directors working in any management job with orders ranging from 2 to 15 years. But the problems don't end their. Even after the ban one's credit history and personal reputation can be permanently damaged. When a director needs to defend these scary lawsuits, being able to draw on insurance funds to hire the best law firms in the country to fight for their reputation & future is essential.

Guaranteed Security

Directors & officers liability insurance protecting the whole of the firm can sometimes be prohibitively expensive, the owner or the board may have overlooked the need for it, or be unwilling to buy it. Company schemes increasingly offer diluted individual cover as insurers try to limit their liabilities. By buying personal director liability insurance privately, to protect yourself personally, you have guaranteed security & peace of mind where others in your company may not.