As a contractor, do I really need directors and officers insurance?

As a contractor, do I really need directors and officers insurance?

Director’s and Officer’s Insurance is a policy that covers the legal representation and related costs that may be incurred by an officer of a company as a result of things including (but not limited to)

  • Employment litigation, the most common cause
  • Allegations of Financial Irregularity in a range of subjects
  • Assorted legislative breaches such as HSE rules
  • Deviating from the company’s Articles of Association
  • Such claims can come from a wide variety of sources, such as employees, shareholders, clients, suppliers and assorted regulatory bodies.

So do you, as a freelance contractor, need this cover?

Firstly you are not necessarily protected against such claims simply by virtue of being a Limited Liability Company. These claims are typically addressed to you personally in your capacity as an officer of the company, liable for the company’s good behaviour and adherence to the various laws in question.

Secondly, if you have employees, the chances of such a claim are increased significantly. The vast majority are employment related, in areas such as discrimination or unfair treatment.

Thirdly, if you are a growing company, investors or new, incoming directors may require your company to have this cover in place as a condition of their contributing to the company.

Like all insurances, you have to do a risk assessment to see if it is worthwhile. While you may not be exposed to employee cases, there are still areas in which you can get caught out, especially if you are not in a purely desk-bound role and so more exposed to the whole gamut of HSE-related laws.

Generally speaking, f you are intending to remain a one man company, it probably isn’t that critical to have such cover. But if you intend growing, it may well be.

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Image: Broken Glass by Duke LeNoir

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