Directors & officers (D&O) liability insurance

Directors and Officers liability insurance protects past, present and future directors and officers of profit or nonprofit companies (Listed and Non-Listed) from damages resulting from alleged or actual wrongful acts Director and Officer’s may have committed in their positions. The policy provides protection in the event of any actual or alleged error, misstatement, omission, misleading statement, or breach of duty. In addition, some policies extend the same coverage to employees.

Directors and officers liability insurance is needed when a board of directors is assembled. Investors usually require that you have directors and officer’s liability insurance as part of the conditions for funding your company.

Q2. Why buy Directors and Officer’s Liability insurance?

Claims from employees, clients and stockholders may be made against any company and against the directors and officers of a company. Since a director or officer can sometimes be held responsible for acts of the company, most directors and officers will want to be covered rather than risk their personal assets.

Investors and members of the board of directors will not risk their personal assets to serve as a corporate director or officer without directors and officer’s insurance coverage.
Q3. What does directors and officer’s liability insurance cover?

Administrative, civil, and regulatory proceedings based on actual or alleged acts, errors, omissions, misstatements, neglect, or breach of duty committed or allegedly committed by a director or officer are covered with directors and officers liability insurance.

Q4.Where are the main exposures for directors and officers?

a. Employees – actions alleging discrimination, harassment, breach of employment contract, defamation, misleading misrepresentation, wrongful discipline, etc.
b. Creditors – alleging that the director allowed the company to trade whilst knowing it could not pay its debts.
c. Government agencies – directors and officers may be
personally liable for breaches of hundreds of statutes.
d. Competitors – Trade Practices Act claims brought against
the directors for misleading and deceptive type conduct.
e. Shareholders – alleging that the directors mismanaged the
operations of the company and its funds.

Q5. What are the Extensions under Director’s & Officer’s Liability Insurance?
1. Assets and liberty costs.
2. Emergency Costs -Sub-limit
3. Special excess Limit per non-executive Director
4. Regulatory Crisis Response Costs
5. Kidnap & Response Cover
6. Crisis Communication Cover
7. Major Shareholder Exclusion
8. Investigation Cost
9. Discovery Period for Retired Director’s etc.

 

Q6. What are the Exclusion under Director’s & Officers Liability Insurance?
1. Pending or prior litigation, demands or judgement.
2. Circumstances notified under a prior insurance policy.
3. Claims brought by one insured individual or the insured organization against another insured individual other than:

I. Derivative actions brought by shareholders or regulatory bodies
II. Employee related actions of wrongful termination, denial of natural justice and defamation relating to wrongful termination, discrimination or sexual harassment claims
III. Claims by an insured individual for contribution or indemnity
IV. Defense costs incurred outside

4. Claims against the fiduciaries or administrators of any retirement or employee benefit plan.
5. Bodily injury or property damage claims.
6. Pollution claims other than for shareholder derivative actions.
7. Deliberately criminal or fraudulent act or omission or willful violation of statute or regulation where established at final adjudication.
8. Illegal personal profits, remuneration or advantage where established in fact.
9. Fines, penalties or multiple damages.

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