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
  • Employee of the company who is the risk manager
  • Employee of the company who is acting in a managerial or supervisory capacity for the company
  • Employee of the company other than a director or officer, acting as a lawyer on behalf of the company for:
  • Any employment or security claim
  • All other claims only if such claim is continuously made against a director
  • Company Secretaries

The directors or Officers means:

  • any person who is a past, present or future director, officer, management committee member, supervisory board member, management board member or governor of the Company duly elected as per the law
  • a person who is a past, present or future de facto director or officer or shadow director of the company
  • any employee of the company who is the past, present or future corporate general counsel (or equivalent position) of the policyholder
  • any director or officer, as defined above, who is the past, present, or future member of the company’s internal audit committee, internal compensation committee, or any other internal committee of the company
  • any person who has been named as a prospective director in the listing or prospectus for a public offering issued by the company

Case Study

A marine and transport company inked an agreement with the oil company to provide services to the latter. It was later alleged that one of the directors of the marine company had breached the confidentiality provisions of the contract by sharing sensitive information about the oil company with its competitor. Due to this, the agreement was revoked and a significant legal action commenced against the director of the marine company. It was alleged not only the breach of the contract but also considered as a “wrongful act” on the part of the director of the marine company, thereby causing financial loss to the oil company. However, the director of the marine company denied any wrongdoing. As the company has a  D&O insurance policy, it approached the insurance company for coverage.

The insurer provided the coverage on the basis of the allegation filed against the “insured person”. Although the oil company’s claims were upheld in the first instance in the court, the director was cleared of all the allegations when the marine company approached the higher court. The D&O insurance company covered all the legal costs incurred by the marine company in defending its director in the court.

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