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All about directors' liability insurance

When disputes have arisen, the liability of directors is assessed, focusing on the legal rule that every director must be able to perform his or her management duties properly. The starting point of this law is collective liability of the board, if improper management causes damage for the foundation, for example, and the director can be seriously blamed for this.

Directors' liability is easily insured by taking out directors' liability insurance. If you work as a director or supervisory director, you can be sued in your private capacity if you cause damage due to improper management, for example. If you do not take out insurance for this, this action can have major consequences for you as a person. You can cover the risks you run for errors in the performance of your duties by taking out director's liability insurance.

What is a directors' and officers' liability insurance?

Directors' liability insurance is an important insurance for directors, supervisory directors and supervisors. This insurance protects the private assets of directors, supervisory directors and supervisors against the risk of being held personally liable for pure pecuniary loss due to errors, omissions or negligence in the performance of their duties. This is, for example, in the case of financial loss due to a managerial error caused by you or a fellow director. As a board, you must always perform your duties properly. If damage is caused by improper management, the entire board is personally liable. To protect yourself against this, you can take out directors' liability insurance. All legal costs, including the costs of a lawsuit, are co-insured for liability.

Why a director's liability insurance?

Directors' liability insurance protects a director's private assets at the time of liability. When you are appointed as a director of an association, for example, you do not immediately think about possible future liability issues. But with recent changes in the law and case law, it is increasingly likely that directors will be held personally liable for the financial consequences of mistakes made by the board. This also means that the private assets of directors can be addressed.

The directors' and officers' liability insurance covers the personal liability of the director and/or officer up to the insured amount. The insurance ensures that the financial risk for directors and supervisory directors is limited and that the private assets of directors and supervisory directors are protected against errors or alleged errors. Private liability insurance does not cover executive and supervisory directors.

What does a director's liability insurance cover?

In addition to the personal liability of the insured as director, liquidator or commissioner/supervisor for pure financial loss as a result of an act or omission, the following matters are also covered by the directors' and officers' liability insurance:

  • Liability due to improper performance of duties

If you are held liable for damages due to improper performance of duties.

  • Liability in tort

When you are held liable for damages by committing a wrongful act.

  • Internal and external liability

Liability for damages of the organisation you manage (internal) and liability for damages of third parties (external).

  • Legal Help

The costs of defence and legal aid are insured. Even if the claims are unfounded.

  • Walk-in

If, after the effective date of the insurance, someone holds you liable for an incident that took place before the effective date, this is insured, unless stipulated otherwise. The claim or circumstance must not have been known to you at the start of the insurance.

  • Outlet

If, after termination of the insurance, you are held liable for an incident that occurred before the end date of the insurance, coverage can be purchased in certain cases.

What is not insured?

Damage caused deliberately or as a result of fraud or property crime such as theft, fraud or forgery is not insured. In addition, the following matters are also not insured with a professional liability insurance.

  • Fines and penalty payments
  • No coverage in America
  • Insured persons within the same body shall not be regarded as third parties
  • Damages in connection with non-compliance with legal obligations regarding accounting and financial statements
  • Liability for damages in connection with legal acts which have provided you with a personal benefit or which were intended to provide a benefit.
Premium

The premium for directors' liability insurance depends on the organization you are insuring and the amount to be insured. On Alpina.nl we have listed an indication premium for the different policies. This will give you an idea of the premium for directors' liability insurance. Taking out the insurance is customized, which means you can request a quote from us. Within two working days you will receive a personal quote via e-mail. If the quote is approved, you can take out the insurance directly with us.

Compare

Are you considering purchasing directors' liability insurance? Then, of course, you'll want to know what such insurance will cost and where best to purchase it. You can do this by comparing directors' and officers' liability insurance. On Alpina.nl we have listed the premiums of the various policies for you. This will give you an idea of the insurance premium. Of course, you can also request a quote directly from us. You will then receive a quote tailored to your personal situation by e-mail within 2 working days.

What does director's liability insurance cost?

The cost of directors' liability insurance depends on the organization for which you purchase insurance and the amount to be insured. Request an onlinequoteand you will receive the quote within 2 business days by e-mail. We have already calculated an indication of the premium below.

You can easily request a quote for directors' liability insurance online. Do you still have questions about taking out directors' liability insurance or would you like to consult with one of our insurance specialists first? Then please contact us! You can reach us by phone at 085 - 013 1109. We are at your service Monday through Friday from 8 a.m. to 6 p.m.

Premiums for directors' and officers' liability insurance

Statement of premium excludes one-time policy fee and insurance tax 21%. Request a quote online here and you will receive the quote by email within 2 business days.
Premium per month
VVE from € 43.00 Calculate premium
Driver from € 13.00 Calculate premium
Foundation from € 23.00 Calculate premium

Who is director's liability insurance for?

Directors' liability insurance is not mandatory, but it is recommended. Costs due to damages from board errors can be high and are often difficult to foresee. Damages are more readily claimed and often the question of fault is complex.

As a director or commissioner, you deal with several partners. Problems can always arise, such as conflicts between members, divisions within the board or debtor problems. If compensation claims are made, they can be high. Of course, you want to protect your private assets as much as possible and not have to personally pay for the claim.

With directors' liability insurance, you reduce your financial risk. There are different directors' liability insurances: for Associations and Foundations, Owners' Associations and Limited Liability Companies.

Foundation

You are a board member of a foundation. This makes you (co-)responsible for the decisions taken in the foundation. It does not matter whether the foundation is large or small. Does your foundation have several board members? Do these board members make decisions individually or together? Then it is wise to take out directors' liability insurance. When multiple board members make different decisions, there is a chance of making mistakes. These mistakes made may turn out wrong for the foundation and may cause damage. If you or the foundation is held liable, it's nice to have coverage for those forms of liability. After all, you don't want to lose your entire private assets.

Association

A special basic BTA policy has been developed for associations and foundations with a balance sheet total of up to €2,500,000. As a director of an association or foundation, you can be held privately liable for the financial consequences of mistakes made by the board. Even if the claim is not assigned, it can involve defense costs. In addition, you may also be held personally liable if you perform board duties at the association or foundation without compensation. Directors' liability insurance is then a must.

VVE

A liability claim can have major financial consequences both for the Owners' Association (VVE) and for the board members individually. This is because board members are jointly and severally liable, and in the event of a claim, their private assets can be claimed. Directors' liability insurance protects you as a director of a Homeowners' Association if you are held liable for mistakes made while performing your duties. Even if you are claimed in your private assets. Here it does not matter whether you receive compensation for your work or not.

For volunteers

A board position is often voluntary. Normally, a volunteer who causes damage must pay for it himself. However, if you are a volunteer in a board position, you can take out director's liability insurance. Directors' liability insurance ensures that you are insured if you are held personally liable because you did not perform your duties properly or acted outside your authority. With this insurance, your private assets as a director, including as a volunteer, are protected and potential property damage is covered. Thus, directors' liability insurance is also for volunteers with an administrative function.

Sole proprietorship

A person with a sole proprietorship is personally liable for debts incurred by his or her business. This is because of the non-segregated assets of a sole proprietorship. This is because the assets of the sole proprietorship are the assets of the director/founder. Thus, you are already personally liable for paying taxes and contributions. If a sole proprietorship enters into obligations that are not paid, there is a director's liability and the director must pay. The same also applies to a Limited Liability Company (VOF).

Non profit

Many directors assume that they and their fellow directors take their task seriously and will not make any crazy decisions. Nevertheless, there is more to managing a non-profit organisation than just managing or supervising the association or foundation. In practice, a board member can be challenged from both within and outside the association. For example, if an association has new pitches laid out by a non-specialist contractor, because it is cheap. However, the pitches are condemned for competition and therefore have to be replaced. However, the contractor has since been declared bankrupt and the club is therefore incurring double costs. The members of the association can hold the board liable.

Cooperative

A cooperative is a corporation, and that means you can buy the same insurance. As the board of a corporation, you are often jointly responsible for the day-to-day operations and implementation of policies within the corporation. You deal with many different shareholders on a daily basis. As a result, conflicts can easily arise. Members of a board can be held liable, for example by being guilty of mismanagement or if the company goes bankrupt due to financial mistakes. Avoid paying personally for these mistakes and take out directors' liability insurance.

What are the implications of the WBTR?

Since 1 July 2021, the Act on Management and Supervision of Legal Persons, or WBTR for short, has become active.

This law was created due to numerous incidents and abuses that occurred in recent years. This had to do with poor governance.
The purpose of the WBTR is professionalization by, among other things:

  • Improving governance and supervision of associations and foundations
  • Preventing mismanagement, irresponsible financial management, self-enrichment, abuse of position and other undesirable activities, harming associations and foundations.
  • Driving good governance

This covers associations, foundations, cooperatives and mutual societies. VVEs and denominations are excluded from the WBTR.

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