And it is probably unlikely that insurers who have offered such policies would decline claims on the basis that their policies are unlawful. But directors insured by these policies need to know that they may be relying not on strict legal rights but on their insurer's unwillingness to be seen to back away from their policies. Not all directors will need all the cover available under these policies. For example, directors of some companies may face little or no risk of breaching the Consumer Guarantees Act. Directors should ensure that the premiums paid and excess carried by the company on fines and penalties insurance match the practical risks that particular directors face.
Most policies cover former directors, so directors generally remain covered even after they retire.
However, directors who are considering resigning may wish to seek the company's assurance that they will continue to be covered by the company's policy, or arrange coverage under a separate policy themselves. Similarly, while alternate directors and directors of subsidiaries will often be covered by a company's directors and officers liability policy, it is not always automatic, so they may wish to check their position with the company and its insurers. A company may not indemnify or effect insurance for directors for all potential liability. If a company indemnifies a director against liability to the company or a related company, or against costs incurred in defending a claim involving such liability where the director is not successful, that indemnity will be void. And a company may not effect director's insurance for criminal liability, or for liability resulting from a breach of a director's duty to act in good faith and the best interests of the company.