Seminar raises question of distinction between D&O; and PI Insurance

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A recent breakfast seminar for Non-Executive Directors (NEDs) hosted by Kleinwort Benson focused on why it is so important for NEDs to be protected by Directors’ and Officers’ liability (D&O;) insurance. Regulatory changes are placing more statutory demands on NEDs and, increasingly, courts are demonstrating that they are willing to hold NEDs fully liable for any breach of duty.



But what about professional indemnity insurance? Wouldn’t that provide the necessary cover?



In a report on the seminar posted on guernsey.isle-news.com, the argument is made that whilst professional indemnity insurance will, in the event of a claim brought on the grounds of negligence, protect the assets of a company, D&O; will provide protection for the personal assets of directors and officers.



But this distinction, of course, relates to insurance policies held in the company’s name. And you certainly wouldn’t want to become an NED of a company that didn’t hold suitable D&O; insurance. But given that NEDs typically have professional interests outside the company whose board they sit on, they might well have a need for their own professional indemnity insurance.