SignElite

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) has not, its actually unlimited, so you could stand to lose your home, your car, your valuables, spouse (although some of you may be thinking that wouldn’t necessarily be a bad thing) dog, cat – you get the picture.

So, what do we need to do to make sure the Company and yourselves as directors and senior company members are covered?

We all know that actions can come from anywhere, but of course it will never happen to you as it doesn’t really happen does it, not to small businesses anyway. Wrong… it can happen to small businesses as well as larger corporate ones.

Covering the Directors and Officers (D&O) of the business is quite straight forward, however, we need to make sure some very important optional 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 and 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, age or disabilities, or even sexual harassment cases.

As a Director, or senior member of a Company you are responsible for the running of said Company, and the decisions made within that Entity so a third party may find it extremely easy to assign the blame to you directly. The reason being is that so many decisions are made on a day to day basis in respect of employees, customers, legal and compliance issues, suppliers, even with regard to other shareholders, it opens up an incomprehensible number of ways for claims to be brought against you and these are all potentially risky areas.

So, how might claims arise against you?

Firstly, your employees, and this does not just mean those currently working for you, but takes into account former employees or 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 your employee takes it the wrong way and thinks it was a racist remark and straight away 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 and Officers policy with the above extensions to protect you and the business.

Claims however do not arise just from Employee issues; there are many other areas such as Health and Safety, other 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 within the business hold you responsible for a wrongful act.

Imagine, as a managing director you decide the health and safety procedures in place within your company are unnecessary. As a result of this decision someone is injured or even dies. To make matters worse you elected not to proceed with the Directors and Officers policy your Broker offered to you? The HSE are now involved and as it was your decision to disregard the safety requirements, they have decided to hold you personally responsible for putting the person’s life in jeopardy…..let’s not go there shall we….the cost of the actions brought against you could be massive! Just one point on this, there is no insurance available for criminal actions which health and safety breach’s are considered as. Your D&O cover would generally defend you, up until the point it becomes criminal and then you are on your own.

Also, simple tasks can get ignored, ones we never seem to get around to but which could arise 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? Has anyone heard of Legionnaires disease? Or when was the last time the fire extinguishers were replaced or checked? Is that fire door still blocked by the new filing cabinet or has someone finally found a place for it? There are many potential pitfalls with dire consequences it does not bear thinking about….

Don’t say I’ll organize it tomorrow. Do it now!

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

The simple fact is the amount of claims brought against employers, and directors individually are on the increase. People are no longer afraid of claiming as the current trend of a no win, no fee case, as regularly advertised on TV, means the claimant has nothing to lose…..but you do!

The above is for information and guidance only and should not be relied on for individual circumstances and professional advice must always be sought specific to your individual circumstances and requirements. Finally any and all comments referred to anywhere on this site is for the United Kingdom (UK) market only.