Directors and Officers Liability

Directors and Officers of companies are exposed to significant personal liability when they carry out their duties in relation to their company. They can be held liable for their own actions as well as the actions of others. The consequences of this personal liability could be financially ruinous for these individuals.

The demise of well known companies both in Australia and overseas has meant that company directors and officers are subject to increasing regulation and scrutiny.

Directors and Officers Liability Insurance is therefore an important consideration for all company directors and officers.

What is Directors & Officers Liability Insurance?
Director & Officers Liability Insurance covers the personal liability for damages and defence costs of company directors and officers in the event that action is taken against them for breaches of duties they owe as directors or officers of the company.

Who needs Directors & Officers Liability Insurance?
All company directors and officers, be they executive (or non-executive) directors and officers of public or private companies - large or small operations are exposed to third parties bringing claims against them or being required to attend official investigations into the affairs of the company.

It is important to remember that even if the director or officer is innocent the defence costs of a D&O action can put personal assets at risk.

Who could take action against the directors and officers?
Traditionally the most common type of claimants in D&O actions have been shareholders. This is still the case, however there is a growing number of claims arising from an ever increasing number of sources - some examples include:

• REGULATORY AUTHORITIES: such as the Australian Securities and Investments Commission, who can take action against directors and officers it believes have breached the Corporations Act, or the Australian Competition & Consumer Commission, who can bring actions against executives if they believe they have participated in restrictive trade practices such as price fixing.
• EMPLOYEES: can bring personal actions against executives for alleged conduct such as unfair dismissal, discrimination or sexual harassment.
• CREDITORS: can claim that directors of a company continued trading after the company was technically insolvent - in breach of the Corporations Act.
• COMPETITORS: can bring actions against executives for defamation, infringement of patent or copyright and the numerous areas within restrictive trade practices (eg. Price fixing, collusive conduct, predatory pricing etc.).