Professional indemnity (PI) and directors' and officers' (D&O) liability are the two policies most professional firms hold side by side. They are often confused because both respond to allegations of wrongdoing and both defend the insured. They cover entirely different things. PI protects the firm against civil liability arising from the professional services it delivers. D&O protects the individuals sitting on the board — and, in some structures, the company itself — for decisions taken in their capacity as directors or officers. This entry maps the boundary and where the two overlap.
A PI policy responds to civil liability arising from the professional services the insured firm has rendered — negligent advice, a drafting error, a missed deadline, an omission in a report. The policy indemnifies the firm for damages together with defence costs. Trigger points are the delivery of services and the claim made against the firm during the policy period. The measure of loss follows the common-law rules on breach of duty and reliance, illustrated by Aneco Reinsurance Underwriting Ltd v Johnson & Higgins Ltd [2001] UKHL 51, which addressed the scope of a professional's liability where negligent advice caused the client to enter a transaction it would otherwise have avoided.
PI is required by most professional regulators — the SRA for solicitors, ARB for architects, RICS for surveyors, ICAEW for accountants — and is a licence condition for FCA-authorised firms carrying out regulated activities under the Financial Services and Markets Act 2000. See the profession pillars for specifics: solicitors, architects, accountants, surveyors and IFAs.
A D&O policy responds to claims made against directors and officers in that capacity. The core exposure is the personal liability that attaches under the Companies Act 2006 — the codified statutory duties in sections 171 to 177, breach of which can give rise to claims by the company itself, by shareholders, by liquidators on insolvency, or by regulators. D&O also picks up defence costs for regulatory investigations, HSE enforcement, HMRC investigations of the director personally, employment claims naming the director individually, and third-party civil claims against the director in their board capacity.
D&O is usually structured in three sides. Side A pays the director directly where the company cannot or will not indemnify them (typically on insolvency, or where indemnity is prohibited by section 232 CA 2006). Side B reimburses the company for indemnifying its directors as permitted under section 234. Side C — entity cover — responds where the company itself is a defendant in a securities claim; more common in listed structures but offered in some private-company wordings.
The trigger is the clearest distinction. PI responds to allegations about professional services delivered to a client. D&O responds to allegations about the management and oversight of the company. A client claim that a report was wrong is PI. A shareholder, liquidator, or regulator claim that a director breached their statutory duties is D&O. The insured under PI is the firm and its personnel acting as professionals; the insured under D&O is the individual director — the company is only a named insured for Sides B and C.
Overlap is most visible in owner-managed practices where one individual is both director and fee-earning professional. An architect who is sole director of her practice is one person wearing two hats. A client suing over a design defect is PI territory. HMRC opening a personal investigation of the director, or HSE serving an improvement notice arising from a site incident, attach to her as director and are D&O matters. Where pleadings straddle the line, notify both insurers and let them agree the allocation.
LLPs and consultancy vehicles present the same pattern. A management consultant operating through a limited company, or a designated LLP member exercising oversight functions, will typically want both covers. The IT consultants and management consultants pillars set out the profession-specific PI position; D&O sits alongside it, not inside it.
The default arrangement for a small limited-company practice is a PI policy in the company's name at the limit required by the relevant regulator, plus a separate D&O policy for the personal exposure of the director. The two policies are placed with different underwriters more often than not, and each carries its own retention. Wordings should be cross-checked so that the definitions of "professional services" (PI) and "insured capacity" (D&O) do not leave gaps in the middle.
Worked example. An architect operates through her limited company. The practice holds PI at the ARB-mandated limit in the company's name. The director holds D&O separately for her personal exposure. Two claims arrive in the same year. The first is a client alleging that a specification error caused a build overspend — PI, notified to the PI insurer, defended on the professional-services trigger. The second is an HMRC investigation into the director's personal tax position as an employer, with a parallel HSE inquiry into a workplace incident at the office. Those attach to the director personally and go to the D&O insurer. The PI policy would not respond to a personal HMRC investigation of the director — the trigger is professional services rendered to a client, not the director's statutory or fiscal position.
If your firm is deciding between the two, or holds one and is unsure whether the other is needed, Apex Insurance Brokers can review the current wordings and set out the options.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.