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Directors and Officers Liability

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Advantages of Directors and Officers Liability Insurance

Comprehensive Cover
Directors and officers liability covers a wide range of litigation that could arise from customers, vendors, shareholders,employees and general public. This board insurance also covers litigation arising due to acts of another company, where the insured is serving as a nominee director.
Worldwide Coverage
D&O insurance can provide worldwide coverage. If the company has operations abroad, it can provide worldwide coverage for both territory and jurisdiction. This could cover claims arising from shareholders based abroad, or suppliers and clients being headquartered abroad.
Full Defence Cost
The Director liability insurance policy would pay for lawyers fees to defend a case in court. In addition, via add-on covers it can reimburse expenses to respond to a regulatory notice, investigation by authorities, and cost of hiring a PR consultant to minimize losses.
Employee Related Claims
Directors and officers insurance carry an extension called Employment Practices Liability Insurance (EPLI) and Entity EPLI. Employees may sue for acts such as sexual harassment, and biased termination.Entity EPLI extension extends this coverage to the company as well.

Benefits of Directors and Officers Liability

Directors' Personal Liability covered

  • As per the Companies Act 2013, Directors & Key Officers of a company can be held personally liable for acts where they breach their authority
  • In specific cases, assets of the directors and officers can be confiscated, or they may be arrested
  • Insurance for directors helps defend against such claims including paying for costs to free-up encumberances on Director's personal assets and liberty through Bailbond expenses

Side A Cover available

  • D&O policy provides Side A and SIde B Cover. Side A cover is specifically to indemnify Directors and Officers when the company is unable to indemnify them directly. Typically, Side A cover has Nil Excess
  • Company may be unable to indemnify its Directors when it is either insolvent or prohbited by law to do so
  • Under Side A cover, Directors & Officers can directly seek indemnification from the insurer without referring to the company

Tax Liability, Civil Fines and Penalties insured

  • In case of firm's insolvency, if the Director is held personally liable for unpaid corporate taxes, the same can be covered under D&O liability insurance
  • D&O insurance can cover civil fines and penalties levied by a court of law or any statutory or appellate authority. It is however necessary that the local law should allow a liability insurance policy to cover this
  • These covers can be bought as customized add-ons in our D&O policy

FAQs

Side A coverage of directors and officers liability insurance policy protects directors, officers and executives from any legal claims by paying them for the defence cost, legal heirs cost, settlement fees and judgement if the company cannot or not willing to indemnify them. For instance, if company is declared bankrupt.

In directors & officers liability insurance policy, Side B coverage means the policy will reimburse the company if it indemnifies the losses of directors, officers and executives. This coverage is generally subject to some deductible. Side B coverage is also called as company reimbursement coverage in D&O policy.

Employment practices liability insurance also known as EPLI insurance, covers directors and officers against the claim made by their own employees. The claim under this cover includes wrongful acts arising from employment process, sexual harassment, discrimination and other employer related issues such as promotion issues. An extension known as Entity EPLI covers the firm as well, if the firm is sued along with the Directors for employment malpractice claims.

Generally, claims arising from dishonest and fraudulent acts of directors and officers are excluded from the policy.D&O for board will not cover willful violation of regulation, illegal personal profits, remuneration and advantage. Claims reported under the prior insurance policy is also excluded under this liability policy.

There are many factors for which the directors and officers of the company may be sued. Some of the factors include, breach of duty resulting in financial loss or bankruptcy, breach of trust on part of director, misuse of companies fund, lack of corporate governance, misrepresentation and misappropriation of companies assets. Theft of intellectual property can also lead to legal lawsuit.

D&O Insurance is generally structured on Right to Defend basis. Most of claims under directors and officers insurance are paid on reimbursement basis. During an event of any claim, you will first spend amount upfront for paying the lawyer fees and then can later reimburse the same fees from the insurance company. It generally happens where the lawyer is chosen by you after taking an approval from the insurer.

In case of a claim, you need to first intimate us as soon as possible about the lawsuit. Then our claim team will inform the insurer and get a surveyor appointed to administer the claim. You would then need submit claim form, with supporting documents required by the insurance company within allowed time limit.

In order to ensure claims are paid in directors insurance, first and foremost thing you should do is to make sure that all the information provided in the proposal form is accurate as per your knowledge. If there are any outstanding claims, please mention the details in the proposal form. In case of a non-disclosure of any information asked in the form, the insurance company can reject any claim arised in the future. Also, need to ensure that your policy is renewed timely to maintain the original retroactive date, because claims pertaining to the period before retroactive date are not covered.

The premium of directors and officers (D&O) liability policy depends on various factors such as type of business, organization's revenue, history of legal claim, gross consolidated asset of your company and the sum insured you choose. It also depends on territory and jurisdiction you want to cover. The best place to start is to check our above indicating premium calculator to plan your insurance purchase.

Most of our policies carry 30 days of extended reporting period at no additional premium if the policy is not renewed by you. If you wish to extend the coverage of the D&O policy for 12 months, you will have to typically pay 50% of full annual premium. Any claim made during this period is deemed to have been made during the policy period.

In order to buy director insurance, you can start up by getting indicative quotes and filling the basic information in the calculator above. Thereafter ask for specific changes, if any, to cover risks peculiar to your business. We will then get multiple quotes from various insurers and help you with documentation while buying the policy. If you do not require any customization, you may directly buy D&O for startups on the website itself.

Yes, all the insurance companies underwrite every proposal as per their own experience and understanding of the risk. Apart from uniqueness involved in individual case, there are other factors which may affect premium. Factors such as treaty limit of the insurer for the product, their past claim experience, and other market conditions. Rates displayed on our calculator are after multiple rounds of negotiations with insurers.

Retroactive date is the date on which a liability coverage begins, means you are covered for incidents that cause damage to a third-party that occur on or after this date as long as the claims related to these events are filed while your liability insurance is still in force. Typically, your policy’s retroactive date is the date on which your director liability insurance is written and will not change as long as you continue to renew your policy.

Directors and liability insurance also provide coverage to all retired directors after their retirement. Discovery period can be limited to certain years or can be upto lifetime of the retired directors, it depends on insurer to insurer. Any liability arising after the retirement of a director will be covered in D&O policy.

All the for-profit, non-profit and privately held organizations with the corporate board or advisory committee should buy directors and officers liability insurance. D&O insurance offers legal financial support to the directors, officers, executive directors,etc against the legal claims arising out of any negligence during their day to day conduct.

Yes, directors liability insurance policy can cover the estates, heirs & legal representatives in case of death of any covered directors or officers. Insurance for board of directors safeguards the family from further distress in case of a demise of any of the directors

Insuropedia

Who are covered under Directors & Officers (D&O) Liability Insurance Policy?

Directors & Officers (D&O) liability insurance safeguards personal liability of directors and officers arising due to wrongful acts done by them in their managerial capacity. The policy covers the following under the policy:

  • Directors and Officers employed by the organization
  • Directors and Officers of subsidiary companies
  • Non-executive or independent directors...
Read More

What is covered under a director and officer Insurance Policy?

Directors and Officers Liability Insurance (D&O) covers the cost of legal defense of directors, even in their individual capacity, when the company is unable to defend them. The D&O cover applies to former, present, and future members of the board of directors or any employee performing a managerial role.

Usually, the policy covers the following...
Read More

What is the concept of Estates and Legal Representatives under Director & Officer Liability Insurance?

The role of a director or an officer holds an imperative positive, and their role goes beyond just developing strategy and managing the performance of the company. These individuals represent the company and have a deep impact on its goodwill.

While serving on the board, they are expected to act diligently and exercise all skills. However, there are...
Read More

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