{"id":413,"date":"2016-12-01T04:46:58","date_gmt":"2016-12-01T04:46:58","guid":{"rendered":"https:\/\/pamstaging.securenow.in\/insuropedia\/?p=413"},"modified":"2025-07-11T12:47:50","modified_gmt":"2025-07-11T12:47:50","slug":"what-is-covered-under-a-directors-and-officers-liability-insurance-policy","status":"publish","type":"post","link":"https:\/\/securenow.in\/insuropedia\/what-is-covered-under-a-directors-and-officers-liability-insurance-policy\/","title":{"rendered":"What is covered under a directors and officers Liability Insurance Policy?"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div><p><span style=\"font-weight: 400;\"><a href=\"https:\/\/securenow.in\/commercial-liability-insurance\/director-officer-liability-insurance\">D&amp;O Liability Insurance Policy<\/a> (D&amp;O) covers<\/span><span style=\"font-weight: 400;\"> the cost of legal defense of directors, even in their individual capacity, when the company is unable to defend them. The D&amp;O cover applies to former, present, and future members of the board of directors or any employee performing a managerial role.<\/span><\/p>\n<h2><strong>Usually, the directors&#8217; and officers&#8217; liability Insurance policy covers the following:<\/strong><\/h2>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Management Liability<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Management indemnification<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Non-Profit Outside Directorship Liability<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"text-decoration: underline;\"><span style=\"font-weight: 400;\">Estates and legal representatives<\/span><\/span><span style=\"font-weight: 400;\"> of incapacitated or deceased insured individuals covered<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Spousal Liability extension<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Cover for the creation or acquisition of new Subsidiary companies (effective from the date of acquisition or creation)<\/span><\/li>\n<\/ul>\n<h3><b>The D&amp;O policy offers the following coverages:<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It covers any loss or damage that the company may incur because of actions mistakenly taken in the individual capacity. As directors and officers under the Memorandum and Articles of Association<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It includes loss or damage arising from claims made against directors and officers for any wrongful act done in their official capacity<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">\u00a0Covers legal expenditure incurred with the written consent of the insurance companies arising out of the prosecution of a director or officer at any investigation, inquiry, or other proceedings by the authority empowered to do so<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It covers expenses incurred by the company\u2019s shareholders in pursuance of a claim against <\/span><span style=\"text-decoration: underline;\"><span style=\"font-weight: 400;\">managerial personnel<\/span><\/span><span style=\"font-weight: 400;\"> for which the insurance company is legally obliged to pay, as per the court\u2019s direction<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It provides indemnity to the legal heirs or legal representatives of the director\/officer if the director or officer becomes insolvent<\/span><\/li>\n<\/ul>\n<h3><b>Real Case: TATA vs. Mistry 2016<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The sacking of Cyrus Mistry as the chairman of Tata Group and its fallout with the company may now trigger a claim under the <\/span><span style=\"text-decoration: underline;\"><a href=\"https:\/\/securenow.in\/commercial-liability-insurance\/director-officer-liability-insurance\"><span style=\"font-weight: 400;\">Directors &amp; Officers Liability Insurance<\/span><\/a><\/span><span style=\"font-weight: 400;\"> (D&amp;O) policy which the company had purchased in 2013.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Tata Sons have a D&amp;O cover offering over $50 million coverage. Besides offering cover to the directors of the company, the policy acts as a cover for a group of companies.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The ousted Mistry raised impairment issues and made a statement that Tata Motors took various loss-making decisions on emotional grounds. As the company is also listed in the USA, the risks of investor actions are very high there. Therefore, in the case of proceedings in the USA, the defense cost will run into millions of dollars. In that situation, the <span style=\"text-decoration: underline;\">Directors and Officers<\/span>\u00a0 Liability policy will help. The policy will cover the costs incurred by the company in defending itself in court.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Similarly, due to any action of the board, there&#8217;s a drop in share prices and erosion of the market cap. It results in loss to shareholders, there is a high possibility that they may take an action lawsuit against the company or the individual directors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this case, the D&amp;O policy will safeguard the company and its directors. Apart from the shareholder action, the cover could also be activated. If an ousted board member brings a retaliatory suit against other board members.<\/span><\/p>\n<h4><b>About The Author<\/b><\/h4>\n<p><strong>Rajesh\u00a0<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">MBA Finance<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With a wealth of expertise in the insurance realm, Rajesh is a distinguished writer specializing in articles focusing on directors and officers insurance for SecureNow. Boasting 9 years of experience in the industry, he profoundly understands the complexities surrounding directors and officers liability coverage. Their articles delve into the intricacies of D&amp;O insurance, providing readers with invaluable insights into risk mitigation strategies and policy considerations. Renowned for their comprehensive knowledge and attention to detail, Rajesh is dedicated to delivering informative and engaging content that empowers individuals and businesses to navigate the complexities of insurance with confidence.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>D&amp;O Liability Insurance Policy (D&amp;O) covers the cost of legal defense of directors, even in their individual capacity, when the company is unable to defend them. The D&amp;O cover applies to former, present, and future members of the board of directors or any employee performing a managerial role. Usually, the directors&#8217; and officers&#8217; liability Insurance [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_lmt_disableupdate":"no","_lmt_disable":"no","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[309,304],"tags":[65,66,67],"class_list":["post-413","post","type-post","status-publish","format-standard","hentry","category-product-features-directors-and-officers-liability-insurance","category-directors-and-officers-liability-insurance","tag-liability-insurance-policy","tag-liability-insurance-cover","tag-liability-insurance-plans"],"acf":[],"modified_by":"SecureNow","_links":{"self":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/413","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/comments?post=413"}],"version-history":[{"count":13,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/413\/revisions"}],"predecessor-version":[{"id":31484,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/413\/revisions\/31484"}],"wp:attachment":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/media?parent=413"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/categories?post=413"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/tags?post=413"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}