Protects directors & officers from liability for allegations of mismanagement of the company, including legal defence costs.

It protects the personal assets of company directors and officers in the event they are personally sued by employees, suppliers, subcontractors, creditors, customers, or other parties, for actual or alleged wrongful acts in managing the company.


Directors and officers liability (D&O) insurance is liability insurance payable to the directors and officers of a company, or to the company itself, to reimburse losses or cover legal defense costs in the event legal action is brought against them personally for alleged wrongful acts in their capacity as directors and officers.



Under the Health and Safety at Work Act 2015 directors and other officers will now be directly liable if they fail to exercise due diligence to ensure their organisation complies with the Act.

An officer is a director, partner or person occupying a position in an organisation that is comparable to that of a director. An officer also includes a person who holds a position that allows them to exercise significant influence and control over the management of a PCBU.

A breach of the duty to exercise due diligence is a criminal offence attracting a maximum penalty of $600,000 and up to five years imprisonment for serious offences. These penalties are imposed on officers personally and are over and above any penalty that is imposed on the PCBU.


The Companies Act requires directors to comply with specific duties. These include:

  • not allowing business to be carried out in a way likely to create a substantial risk of serious loss to the company's creditors
  • not allowing the company to enter into any transaction which could create substantial risk of serious loss to creditors

The penalties for doing so are severe and include making the director personally liable for the debts of the company without any limitation of personal liability. Directors can be liable to imprisonment for a term not exceeding 5 years or to a fine not exceeding $200,000. Directors may also face prosecution by the Inland Revenue Department for failing to pay over PAYE deductions or GST.

Directors can be personally liable if proper action is not taken at the date they knew, or should have known, that the company was insolvent.

If a liquidator decides that there is cause to seek recovery of creditors' losses from directors personally, the Companies Act gives them this legal authority.


The owner and director of a building company died and left his shareholding to his widow. However, the company was unable to survive and became insolvent, leaving a number of customers' projects unfinished and suppliers owed money.

Creditors put the company into liquidation and an action was brought against the widow as sole director of the company for the money owed to creditors.

The court found in favour of the claimant as it was no defence that the widow was not well versed in the company's business.

The D&O policy covered the legal defence costs and damages awarded.


An Auckland-based commercial building contractor got into trouble and was put into liquidation.

The liquidators pursued the director personally under the Companies Act, as the business had been trading while insolvent for many months.

The liquidators sought to recover losses by taking the director's house and other property that was jointly owned by his wife.

The D&O cover responded under the "Spousal Liability" extension to protect the partner's interest also.


The cost of being held personally liable for breaching your duties as a director could easily run into tens of thousands of dollars, not to mention the potential legal costs if you’re taken to court.  Compared to this, D&O liability insurance premiums are an essential investment in managing your risk.


Directors & Officers Liability