Directors and Officers Liability Insurance

Directors & Officers (D&O) liability insurance safeguards the personal liability of directors and officers arising due to any wrongful acts done by them in their managerial capacity. The policy offers a wide range of coverage to the members including the following:

  • Directors and Officers employed by the organization
  • Directors and Officers of subsidiary companies
  • Non-executive or independent directors
  • An employee of the company who is the risk manager
  • An employee of the company who is acting in a managerial or supervisory capacity for the company
  • An 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
  • Company Secretaries

Under a D&O policy,  directors or officers imply:

  • 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)  
  • 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 an 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 Due to this, the agreement was revoked and a significant legal action commenced against the director of the marine company. Not only was a breach of the contract alleged, but it was 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 its 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 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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