D&O insurance: providing protection to your Self-Drive Hire business

Directors’ and Officers’ insurance (D&O insurance) provides cover for the personal losses of a director or officer of a company if they face allegations of wrongful acts whilst executing their duties

The Directors and managers in a business are in a position of responsibility and make decisions daily, that are subject to scrutiny. These decisions can leave them exposed to personal, civil or criminal liability. It is very important to remember that a director’s liability is unlimited; their own personal assets are at risk: their car, their house and even cash in the bank. It is a common misconception that directors assume the company will provide indemnity – but this only happens in very limited cases and only in certain situations.

D&O insurance works to protect directors, officers, partners and other key company personnel in the event they stand accused of a wrongful act, such as:

• Breach of trust
• Breach of duty
• Negligence
• Error
• Misleading statements
• Wrongful trading
• Defamation, slander or libel

A company director has responsibility for ensuring the company complies with the:

• Health & Safety Act
• Companies Act
• Insolvency Act
• Companies Security Act
• Company Directors Disqualification Act
• Financial Services Act
• Insurance Act

Alongside legislation, company directors are often responsible for the complexities of takeovers, mergers, acquisitions and regulatory compliance. Even trading with customers can see claims made.

It is important to remember that directors can also be held accountable for the actions of others. So while a director may not have committed a particular wrongdoing, the actions of a subordinate can have ramifications for a director. Sometimes claims may be spurious and frivolous, but the cost to defend those claims can be significant.

D&O insurance covers costs associated with the defence of an allegation of a wrongful act, any subsequent settlements or awards, help with the financial side of investigations, plus the costs you may incur in an attempt to mitigate the need for investigations.

A policy takes away the financial risks faced by directors and officers, giving them protection should an allegation or claim be made against them. The cost of even simple investigations can quickly stack up, so purchasing a policy makes financial sense.

Claims can be made by many different organisations or individuals including;

Staff

Several named directors of a medium-sized Self-Drive Hire company were named personally in the unfair dismissal of an employee who was claiming damages for injury to feelings and loss of earnings. The directors were required to attend an Employment Tribunal whilst paying for their own legal counsel to fund their defence costs from personal monies and assets. Although the case against the directors was dismissed, the legal costs remained.

Customers

The manager and owner of a small camper hire company failed to arrange adequate servicing and obtain MOTs for their vehicles, despite advertising on their website that vehicles were “regularly serviced, cared for and maintained”. The hirers were unhappy with the condition of the camper and proceeded to make a claim of false advertising due to the misleading statement.

Regulators

The owner of a camper was prosecuted by the Health & Safety Executive for putting customers at risk in the vehicles they hired. The court heard that the owner, although a qualified mechanic, had fitted the gas cooker and heating system to their vehicle, for which he did not hold the required qualification. He was convicted of causing a gas leak and exposing tenants to carbon monoxide.

To discuss arranging D&O insurance for your Self-Drive Hire business, contact us on 01603 649744 or by email.