top of page

Directors and Officers face increased liability exposures and legal defence costs


Company directors and officers across the business world are facing more scrutiny than ever leading to greater liability exposure, including rising legal defence costs.

The pressure on companies to ensure they are protected in an increasingly litigious business world makes it vital to have in place comprehensive Director & Officers (D&O) insurance which can deal with those legal defence costs, cover for any final settlement or compensation award. The duties and liabilities of corporate directors and officers in Europe is a factor both of the companies “home” countries company law and directives from the European Commission.

Heading into 2023 the challenges being created by economic pressures, including high inflation and the threat of a global recession, raise the prospect of increased insolvency leading to potential legal action against directors and officers. It is expected the defence costs and settlement values will continue on an upward curve in the New Year and potential areas of concern include a worrying increase in world-wide cyber and data breaches and company environmental, and social and governance (ESG) compliance.

Claims can be made against the directors and officers within an organisation for alleged or actual wrongdoings due to decisions they took, can be made by shareholders, fellow directors and employees as well as by creditors, funders, customers and regulatory bodies. Industry experts noted double digit insolvencies in 2022 in countries such as Denmark , France, Ireland, Norway, Spain and Switzerland due to macroeconomic factors including the impact of the war in Ukraine.

There has been a steady increase in regulatory and criminal investigations into individuals as well as corporates over recent years, which is only likely to continue – especially given the ever-expanding liabilities facing senior executives and an increasing desire to hold management personally accountable for perceived failings. In 2023, The EU Directive on Representative Actions is expected make it simpler for groups of individuals whose data privacy has been breached to initiate collective actions.

ESG includes diversity and inclusion, climate change, greenwashing and supply chain monitoring  with many involving new reporting requirements triggering increased regulatory and criminal investigations. A claim by ClientEarth, the environmental pressure group, that Shell had allegedly breached legal duties by failing to adopt and implement a climate strategy to align with the Paris Agreement has focussed attention on directors and officers supply chain liability. This all contributes to a concerning scenario that drives up defence costs and settlement values for claims against D&Os.

Against this backdrop it is important directors and officers have in place comprehensive D&O insurance and may agree to the appointment of panel defence counsel in move that could help control defence cost inflation.

Company boards should seek the assistance of a specialist insurance broker, with in-depth technical knowledge and full market access, in order to procure the most suitable Directors and Officers liability insurance. If you would like to discuss this insurance, or obtain a competitive quotation please contact Vida Jarasiunaite or Mark Dutton

bottom of page