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 the Director and Officer 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’ & officers’ liability insurance is needed when a board of directors is assembled. Investors usually require that you have D&O liability insurance as part of the conditions for funding your company.
Q1. Why buy Directors’ and Officers’ 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 corporate directors or officers without directors’ and officers’ insurance coverage.
Q2. What does D&O 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 D&O liability insurance.
Q3.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.
Q4. 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 etc.
Q5. What is the Exclusion under Directors & Officers Liability Insurance?
1. Pending or prior litigation, demands, or judgment.
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. the Deliberate 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 were established in fact.
9. Fines, penalties, or multiple damages.