Additional Liability Options

A full package of liability insurance includes additional policies to cover a broader set of risks faced by all businesses.

Directors & Officers Liability

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.

It is important to note that insolvency is often excluded, but can be added back upon presentation of financial accounts that demonstrate a healthy solvency position.


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.


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 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.

Crime (Fidelity)

This protects the company against financial loss due to the fraudulent or dishonest acts of its employees or other third parties. It also includes cover for investigation costs.


A Christchurch company found that their trusted, long time (12 years) office manager had stolen almost $80,000 over a number of years. They did this through fake invoices and transfers of funds to their own personal accounts. Being in a position of trust and having the authority to both approve invoices and make payments made it easy for her to do this. The fraud only came to light when another staff member picked it up.

A Wellington building company’s worker put $6,000 worth of tools on the company’s account at their merchant. When this was discovered the employee initially denied doing so. When confronted with evidence he admitted it and confessed that he had sold the tools online.
A Queenstown builder operated a company fuel card system for his employees. Over time he suspected that one employee was using it for their private vehicle after they ran up more than $11,000 worth of diesel. When confronted the employee claimed that the card had been stolen, however the insured was able to establish through CCTV footage that it was indeed his employee who had been misusing the fuel card. The police found that the worker had been buying extra fuel then selling it on to friends & family.

Employee Disputes Liability

Provides protection if you get dragged into a dispute with an employee. The policy covers the cost of defending these actions and any damages awarded. Common areas of exposure include a personal grievance action, claims for unjustified dismissal or other alleged disadvantage under the Employment Relations Act.

A builder who resigned following a heated argument with his boss was awarded more than $17,000 by the Employment Relations Authority. The Authority found despite the employee resigning, his employer breached employment law, including failure to keep holiday pay and leave records, pay annual holiday pay and failing to provide an employment agreement. They were ordered to pay $12,000 in penalties for breaching employment law and $5,000 plus 5 per cent interest in unpaid and underpaid holiday pay.
Steve was awarded more than $10,000 after he won an employment dispute against his former employer. He started working for the builder towards the end of 2016. It was his first job and things got off to a good start, although he did have to text his employer to ensure he got paid. But not long into his employment things “absolutely went to s**t”, with pay being withheld. The employer started making threats towards Steve, including telling him that he’d rip his head off.

The Employment Relations Authority (ERA) ruling said Steve was paid $25 an hour under the table. He was never provided with a letter of appointment or an employment agreement. Tax was not being paid to Inland Revenue, so he had no tax records regarding the identity of the employer, the ruling said. After he was fired over the phone in early 2017 Steve took the matter to the ERA.

In mid-January 2017 a new foreman entered the fold and told Steve not to come in to work the next day The ERA said Steve was unjustifiably dismissed because the dismissal process was minimal and unfair and he was not consulted about a possible redundancy.


A Christchurch man was awarded nearly $30,000 for unjustified dismissal after he was sacked for sharing details of his salary with a co-worker. James was hired in June 2017 as a salesman for Whitehouse Builders, a Christchurch building firm, along two other sales staff. After his base salary was reduced he discussed this with another staff member, who confronted the employer and subsequently resigned.

Whitehouse claimed he had not dismissed James, but had told him to go so that there was some space for them both to cool off. However, the ERA found James was unjustifiably dismissed and suffered an unjustifiable disadvantage in his employment by having had his pay reduced unilaterally, and was entitled to a payout. He was awarded $28,630, after a 30 per cent discount was applied due to breaching good faith by revealing his salary.

Legal Prosecution Defence Costs

Covers the legal costs defending a criminal prosecution against the directors, managers and employees for acts committed whilst going about their daily work. It protects you against the cost of having to defend unexpected legal action for criminal acts.

A builder had an argument with two subcontractors he suspected of taking drugs on his site, and the argument became physical. The subcontractors subsequently laid a complaint with the police and the builder was charged with assault. It took 18 months of protracted legal proceedings before he was cleared and charges dropped. His insurance picked up legal costs of more than $20,000.

A builder doing renovation work had a falling out with their client and was accused of theft of jewellery. The homeowner laid a complaint with Police who investigated and this led to charges being laid. These were eventually dropped, but there were many hours of lawyer’s fees to pay.

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