Small businesses alerted to benefits of D&O insurance
Commercial insurance
12th November 2009
With thousands of new regulations and laws released by both the European Union and the UK government each year, it is more important than ever for bosses of small firms to ensure that they are covered, according to Giles Insurance Brokers Ltd.
As company heads and executives struggle to keep track of the mounting legislation that may impact upon their business operations, Directors and Officers (D&O) insurance can provide much-needed protection for company decision makers against the threat of costly lawsuits that hold them responsible for actions taken in the course of their role.
Government figures have indicated that 60 per cent of enterprises believe that regulation poses an obstacle to success and the Federation of Small Businesses has predicted that a freeze on new rules could protect or create 300,000 jobs in the UK. This emphasises the importance of D&O cover for owners and managers of British enterprises, as it can provide them with peace of mind in the face of the growing burden of red tape and the possibility of accidentally breaching legislation.
This dedicated cover provides assistance in the event that a liability claim is made against a firm's owners and directors, which may directly place their assets or their freedom at risk. D&O insurance can help to mitigate against potential losses and can apply to incidents involving negligence, financial mismanagement, consumer protection, libel, health and safety, corporate manslaughter, employment and breach of trust.
However, many owners of smaller companies do not realise that it is not only their firm but they, personally, who can be sued by disgruntled workers or customers, or prosecuted by authorities. In such instances, business insurance policies may not provide the funds required to defend legal action, which is where D&O insurance steps in. Presenting a good case can be vital to avoiding a custodial prison sentence in certain cases where people are being sued or prosecuted, as well as protecting their homes and other assets.
In addition to providing financial assistance for legal defences, policies can also offer an indemnity for any subsequent financial rewards made if a claimant is successful. With the growing culture of blame in Britain, it has become more important than ever for business owners to ensure that their key decision makers are protected against legal action, as well as the company itself.
Claims can affect enterprises of any kind and individuals may still face litigation if a business has limited status, as well as if they left the firm some time ago or do not have a title that includes the word director.
Howard Pearson, retail managing director of Giles Insurance, said: "Blame is a culture now embedded in our day to lives. Individuals and organisations who suffer financial loss will always look for fault and to apply blame wherever possible.
"Therefore a natural action is to look at the Directors and Officers of a business to try an apportion blame. The risk also is not the actual success in these actions against a Director of Officer, but the financial costs in defending such actions brought against them."
As one of the UK's top independent insurance brokers, Giles has access to some of the UK's biggest insurers. As such, it can search the market and source a level of cover to fund legal representation for investigation, defence and settlement costs, in addition to indemnity for the entity as such action can indirectly affect businesses as well as individuals.
