A Directors and Officers (D&O) Liability insurance policy is a very effective and essential liability cover necessary for all types of organizations. The policy is necessary for well-established MNCs, small and medium enterprises (SMEs or MSMEs), and start-ups.
It offers coverage for the loss that arises when the directors and officers make mistakes in discharging their duties. Directors and officers of an organization may commit errors during the course of their jobs. However, these mistakes can cost you dearly. Third parties (customers, employees, shareholders, suppliers, or other stakeholders) may sue the company or the directors and officers. Legal settlements are expensive. Consequently, in the event of litigation, the company and the directors and officers might find themselves in financial trouble.
A D&O insurance policy takes care of this financial trouble. It covers the legal costs and the costs incurred in compensating third parties. The policy provides a comprehensive scope of coverage. The scope is divided into three parts – Side A, Side B, and Side C covers in a D&O policy.
Let’s understand what these three parts cover in D&O policy–
Side A cover
In case the organization itself cannot come to the rescue of directors and officers, Side A cover protects them against financial liabilities. Thus, if the company files for bankruptcy or becomes insolvent and is unable to pay the claims on behalf of the directors and officers, the D&O policy pays the claims. Therefore, Side A cover protects the personal financial assets of the directors and officers of the company. If there is a liability for any wrongful acts, errors, or breach of duty, the directors’ and officers’ policy’s Side A cover will pay the legal costs and settlements.
Side B cover
Side B cover of directors’ and officers’ liability policy covers the liability that the organization itself faces. The organization can face high financial costs when it defends its directors and officers and pays the costs incurred in litigation against them. Side B cover indemnifies the organization for this loss suffered. So, if the organization incurs legal costs and pays settlements to third parties on behalf of its directors and officers, it can claim reimbursement of such costs under the Side B cover of the D&O policy.
Side C cover
Side C basically covers companies listed on the stock exchange. When these companies incur liabilities for the traded securities, the D&O policy covers them. Therefore, the policy covers the company against the liabilities that it suffers due to any securities-related grievances. Consequently, if the shareholders file a lawsuit against the company for any reason related to the securities traded on the stock exchange, Side C cover would indemnify the company for the legal costs incurred.
Hence, Sides A, B, and C cover different features of D&O policy coverage. The organization should understand the coverage benefits in each section before buying the policy. Then, it should choose the most suitable types of covers that it requires for comprehensive and all-around protection.
SecureNow provides you with various options for a Directors and Officers Liability policy. These options offer the best benefits with costs that are significantly lower (at least 20% less price) than what you would otherwise get from the market.