Directors & Officers Liability

A director is personally liable for the fulfilment of their duties as a director. The aim of D&O cover is to meet the legal defence and settlement costs incurred by individual company directors and other senior personnel as a result of allegations of corporate malpractice. Without such cover, they must use their own personal wealth and assets to defend a claim.

A D&O policy ensures that an insured person receives expert legal advice and benefit from the support of a professional defence team.

In the event that damages and other costs are awarded against our insured, these too will be met under the terms of the policy, subject to the limit of indemnity.

Different types of director:

De jure director:
Officially appointed in accordance with the Articles of Association of our client (essentially, a ‘normal’ director noted with Companies House).
A de jure director will be either:
• An executive director: participates in the day-to-day management of the firm


A non-executive director: does not run the firm day-to-day, but is usually involved in planning and policy making. Their main function is to monitor and challenge the executive directors.
They are also sometimes appointed to provide prestige to the board as a result of the individual’s celebrity or standing in a particular trade sector.
An executive director is generally held to a higher standard of legal liability than a non-exec, but a non-exec is certainly not immune from a D&O claim.

De Facto director:
Not officially appointed but performs the duties of a director for our client.

Shadow director:
Holder of controlling or majority stock of a private firm but is not a de jure director and does not openly participate in the firm’s governance.
Their directions or instructions are must be routinely complied with by the employees or other the directors – therefore creating a D&O exposure.

An officer is anyone else who acts in an official capacity on the behalf of a company – Such as a company secretary, executive, manager, or other individual authorised to act.

What is a director?

An individual appointed or elected as a member of the board of directors of a company who has responsibility for determining and implementing the company’s policy.

Are just directors and officers covered?

The common definition of ‘insured person ́is:
Any natural person who is a director, partner, member or officer of our client or subsidiary:
Reference to natural person excludes claims brought against a corporate entity, including a corporate shareholder – see Corporate Legal Liability.
This definition is very wide and is often clarified further in the policy wording. The following may or may not be covered:
• Shadow directors
• An employee working under a contract of service (essentially a subcontractor)
• Any independent person seconded by our client
• Any applicant or candidate for employment by our client
• The spouse of an insured person following a claim brought against the insured partner
• The estate or legal representatives of any person who cannot act upon a claim brought against them (e.g. death, illness, bankruptcy)

It is crucial that we fully understand the structure of our client and their operational activities to ensure that all D&O exposures are fully covered.