Directors and officers insurance policies
Directors and officers insurance policies

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Directors and officers insurance policies
  • CA 2006 provisions
  • Why purchase D&O insurance?
  • Common claims
  • The D&O policy
  • Underwriting considerations
  • Notifying the insurer of a claim

A director of a company limited by shares is exposed to a wide range of potential liabilities that could arise as a result of their acts or omissions carried out during the course of business of the company. One way in which a director might be protected from liability is by the company purchasing a directors' and officers' insurance policy (D&O policy).

This Practice Note summarises the:

  1. Companies Act 2006 (CA 2006) provisions in relation to indemnifying directors against liabilities

  2. reasons why companies purchase D&O policies

  3. common terms, conditions and structures of D&O policies

  4. common extensions and exclusions within D&O policies

  5. underwriting considerations likely to be made by the insurance companies offering such D&O policies

  6. procedure for notification of a claim to an insurance company

CA 2006 provisions

CA 2006 contains a general prohibition against exempting or indemnifying directors against liabilities. However, there are statutory exceptions to the general rule providing that directors can be protected from liability by:

  1. the acquisition and maintenance of insurance by the company for its directors against liabilities

  2. the company giving qualifying indemnities to its directors against certain liabilities

Prior to 2005, companies were prohibited from acquiring insurance or giving indemnities to protect its directors. Such permission came about due to recognition of the need for a proportionate balance between:

  1. ensuring that directors do not act dishonestly