Also, Directors & Officers (D&O) liability insurance safeguards the personal liability of directors and officers. These liabilities may arise if the directors and officers do any wrongful act in their managerial capacity.
Who all are covered under a Directors & Officers policy
The policy covers a large number of people in a company, including:
- Directors and Officers employed by the organisation
- Directors and Officers of subsidiary companies
- Non-executive or independent directors
- Risk managers
- Managers or supervisors
- An employee acting as a lawyer on behalf of the company for any employment or security claim
- Company Secretaries
- And, other important executives. Generally, most employees handling a team are considered.
Under a D&O policy, directors or officers imply:
- 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 of the company
- Past, present or future corporate general counsel (or equivalent position) of the company
- 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
- A prospective director in the listing or prospectus for a public offering issued by the company
- Also, Important executives who may not be on the board
A marine and transport company inked an agreement with an oil company to provide services to the latter. However, it was later alleged that one of the directors of the marine company had breached the confidentiality provisions of the contract. He had shared sensitive information about the oil company with its competitor. Consequently, the oil company revoked the agreement and initiated significant legal action against the director of the marine company. The company alleged a breach of contract. Additionally, it considered the director’s act wrongful due to which the company had faced financial loss. However, the director of the marine company denied any wrongdoing. As the company had a D&O insurance policy, it approached its insurance company for coverage.
Subsequently, the insurer provided the coverage on the basis of the allegation filed against the “insured person.” Although the court upheld the oil company’s claims at first, it cleared the director of all the allegations when the marine company approached the higher court. Eventually, the D&O insurance company covered all the legal costs incurred by the marine company in defending its director in the court. Without this insurance the director or the company would have had to pay Rs 40 lakhs of legal costs.
Role of SecureNow
So, to have a smooth settlement of your D&O liability insurance policy, you must choose the right insurer. SecureNow can help you think through the best covers for your D&O and also give a detailed comparison of different insurance companies offering a D&O liability insurance coverage.