Running a business involves significant responsibilities, and managers are often exposed to legal risks that can engage their personal liability . A management error, an unintentional fault or a bad decision can lead to prosecution, jeopardizing their personal assets . Directors' Liability Insurance (DLI) is the solution to protect yourself against these risks. Find out why it is essential and how to choose the most suitable coverage.
1. What is Directors’ Liability Insurance?
Directors' liability insurance protects company directors against the financial consequences of legal actions brought against them in the context of their professional activity.
📌 It covers:
✅ Defense costs in the event of legal proceedings.
✅ Damages in the event of a conviction.
✅ Management errors, strategic mistakes or unintentional negligence.
✅ Disputes with shareholders, employees, competitors or administrative authorities.
💡 Good to know : This insurance is separate from Professional Liability insurance , which covers the company itself and not the manager as a natural person.
2. Why Can a Manager Be Held Liable?
Business leaders have legal and regulatory obligations . If they fail to do so, they may be personally prosecuted, which can seriously impact their financial situation.
a. Management Errors and Negligence
- Poor strategic decision making leading to financial losses.
- Management failure impacting the profitability of the company.
- Failure to comply with the company’s statutes.
b. Conflicts with Shareholders or Investors
- Disputes in cases of bad governance.
- Lack of transparency in financial management.
- Abuse of power or fraudulent management.
c. Prosecutions for Breach of Legal Obligations
- Failure to comply with labor law (unfair dismissals, discrimination, harassment).
- Breach of tax and social security rules.
- Late bankruptcy filing or accounting irregularities.
d. Conflicts with Third Parties (Customers, Suppliers, Competitors)
- Abusive termination of commercial contract.
- Accusations of anti-competitive practices.
- Failure to comply with contractual deadlines.
🔹 Example : A manager is sued by a shareholder who accuses him of poor management that caused a drop in turnover. Without managerial liability insurance, he will have to pay the lawyer's fees and any compensation with his own funds.
3. What are the Risks in the Absence of Directors’ Liability Insurance?
Failure to take out Directors' Liability insurance can expose a business leader to heavy financial penalties and jeopardy of their personal assets.
❌ High legal costs : Lawyer's fees and expert fees can reach several thousand euros.
❌ Order to pay damages : In the event of an unfavorable judgment, the sums to be paid may be significant.
❌ Damage to image and reputation : A lawsuit can tarnish the reputation of the manager and his company.
❌ Personal financial difficulties : In the event of a conviction, the manager may have to draw on his personal assets to compensate the complaining parties.
💡 Without Directors' Liability Insurance, the financial risk is directly borne by the director and not by the company .
4. What does Directors’ Liability Insurance cover?
The Directors' Liability Insurance covers:
✅ Legal defense costs : Lawyer's fees, expert and legal proceedings costs.
✅ Compensation in the event of a conviction : Damages awarded to the plaintiffs.
✅ The financial consequences of management errors (except voluntary fraud).
✅ Protection of heirs and beneficiaries in the event of legal proceedings after the departure of the manager.
✅ Disputes with regulatory bodies (tax authorities, competition authorities).
💡 Some insurance policies also cover former executives in the event of legal action taken after their term of office.
5. How to Choose Suitable Director Liability Insurance?
Not all insurance contracts are equal. Here are the criteria to analyze before subscribing:
a. The Level of Coverage
- Amount of legal costs covered.
- Compensation ceilings in the event of a conviction.
- Protection of former managers and beneficiaries.
b. Types of Risks Covered
- Financial management and strategic errors.
- Disputes with employees, suppliers, customers and shareholders.
- Violations of tax and social regulations.
c. Exclusion of Intentional Faults
- Insurance generally does not cover intentional fraud or intentional crimes .
- Check the contract exclusions to avoid unpleasant surprises.
💡 KT Assur&Bank helps you choose the Directors' Liability insurance best suited to your sector of activity and your level of responsibility.
6. Why Choose KT Assur&Bank for Your Directors’ Liability Insurance?
🚀 Tailor-made solutions to protect managers against professional risks.
💰 Competitive offers with full guarantees.
📞 Personalized support to choose the most suitable coverage.
✅ Rapid coverage of defense costs and possible compensation.
🔹 Contact us now to get a quote and protect your liability as a manager!
Conclusion
Directors' Liability Insurance is essential protection for any business manager. It covers defense costs and compensation in the event of litigation, thus avoiding heavy financial penalties and jeopardizing the manager's personal assets . By taking out Directors' Liability Insurance with KT Assur&Bank , you benefit from optimal protection adapted to your business .