Essential Corporate Cover

If you are a company director or senior company member, then you could be exposed to claims made against you personally.

You might be forgiven that as a company director you can hide behind the limited status of the company. However, this is not always the case and the company has limited liabilities.

If you are found to be held personally responsible for an action or a bad decision, the liability may fall directly on your shoulders and bypass the company altogether. Where a company in simple terms has limited liability, you as a director or officer (senior company member) have not. It's actually unlimited, so you could stand to lose your home, your car or your valuables.

So, what do we need to do to make sure your company, directors and senior members are covered? And before you start thinking this isn't necessary if you're a small business, think again. It can happen to small businesses as well as larger corporations.

Covering the directors and officers (D&O) of the business is quite straight forward. However, we need to make sure that some very important additional extensions to the policy are included too, which are Entity cover and Employment Practice Liability.

The D&O covers what it says on the tin - the Directors & Officers and the action taken against them as individuals. The Entity covers the company as a whole and the Employment Practice Liability will protect you as a director and also the company against any employment related issues such as wrongful dismissal, discrimination against race or even sexual harassment cases.

As a senior member of a company you are responsible for the running of said company and the decisions made within it, so a third party may find it easy to assign the blame to you directly. The amount of decisions made on a day-to-day basis means that there are an incomprehensible number of ways for claims to be brought against you, and these are all potentially risky areas.

Firstly, your employees. This does not just mean those currently working for you either, but takes into account former employees and even new or potential employees who are simply at the interview stage. All of these areas are open to claims. Say the wrong thing and if your employee thinks it was a racist remark then straightaway there is a case against you.

As soon as your company begins trading and you take on any employees, be it full or part time, then it is advisable to take a directors & officers policy out with the above extensions to protect you and the business.

But claims do not just arise from employee issues; there are many other areas such as health and safety, shareholders, governments and regulatory bodies which must not be ignored. Don't forget fellow directors - make the wrong move and you could find that other directors might hold you responsible.

Imagine if, as a managing director, you decide that the health and safety procedures in a place within your company are unnecessary and then someone is injured or even dies. To make matters worse you elected not to proceed with the directors & officers policy your broker offered to you? The HSE are now involved and as it was your decision to disregard the safety requirements and they decide you are personally responsible for putting the person's life in jeopardy. The final cost of the actions brought against you could be massive! Just one point on this, there is no insurance available for criminal actions such as Health & Safety breaches. Your D&O cover would generally defend you, up until the point it becomes criminal and then you are on your own.

Simple tasks can get ignored, ones we never seem to get around to but which could result in a potentially catastrophic claim. For instance, the air-conditioning units in the building, when were these last cleaned and serviced, especially after having so much usage in the summer? Have you heard of Legionnaires disease? When was the last time the fire extinguishers were replaced or checked? Is that fire door still blocked by the new filing cabinet? There are many potential pitfalls with dire consequences that don't bear thinking about.

These are just a few examples of potential claims but remember it only takes one error and your healthy bank account and comfortable lifestyle could disappear overnight.