The Directors and Officers (D&O) policy offers coverage for the personal liability of directors and officers arising from wrongful acts committed in their managerial roles. It also covers defense costs, which are paid in advance of a final judgment. This policy protects directors, officers, and employees against claims for actual or alleged breaches of duty, negligence, misstatements, or errors in their managerial capacity.

Key Benefits

  • Protection for Directors Personally
    If the business is sued, specific directors may be named, putting their personal assets at risk. D&O insurance helps protect directors from personal financial loss, safeguarding their income, family, and livelihood in case they have to personally compensate affected parties.
  • Coverage for the Business
    D&O insurance typically covers multiple individuals within the business, thus reducing the company’s financial risks. When directors are protected from personal losses, the business is likewise shielded, helping to stabilize the financial position of both parties.
  • Enhancing Corporate Potential
    Having D&O coverage strengthens the business’s security and may improve its reputation. The existence of this coverage can be an attractive factor when hiring future directors, as many prospective candidates will expect the company to provide D&O coverage. This can help attract and retain top talent, boosting the business’s overall performance.

Coverages

  • Coverage for individual directors and officers when the organization cannot indemnify them due to legal restrictions or financial constraints. However, exclusions may apply if the organization refuses to cover the legal defense costs or if a bankruptcy court orders non-indemnification.
  • Coverage for the organization when it indemnifies its directors and officers (corporate reimbursement).
  • Coverage for the organization itself against securities claims, applicable to publicly traded companies and large private companies (small private companies may receive broader “entity” coverage).
  • An optional sublimit for investigative costs related to shareholder derivative demands.
  • Protection against losses resulting from actions taken by directors and officers in their individual capacity while fulfilling their duties under the Memorandum and Articles of Association.
  • Coverage against losses arising from claims related to wrongful acts in their official capacity.
  • Legal costs and expenses incurred, with the insurer’s consent, in the prosecution (criminal or otherwise) of any director or officer, including participation in investigations, inquiries, or other proceedings.
  • Expenses incurred by a shareholder pursuing a claim against a director or officer, which the company is legally required to pay under a court order.
  • Indemnity for the estate, legal heirs, or representatives of a director or officer in the event of their insolvency.

Exclusions

  • Intentional illegal acts, dishonest, fraudulent, criminal, or malicious acts, or any illegal profits.
  • Bodily injury, sickness, disease, or death of any person, or damage to tangible property.
  • Personal guarantees.
  • Personal injury or damage to property.
  • Pollution damage or pollution claims, except for shareholder derivative actions.
  • Losses directly resulting from goods or products manufactured or sold by the company.
  • Fines, penalties, or multiple damages.
  • Pending or prior litigation, demands, or judgments.
  • Circumstances disclosed under a prior insurance policy.
  • Claims brought by one insured individual or the insured organization against another insured individual, except:
    • Derivative actions brought by shareholders or regulatory bodies.
    • Employee-related claims for wrongful termination, denial of natural justice, defamation related to wrongful termination, discrimination, or sexual harassment.
    • Claims by an insured individual for contribution or indemnity.
  • Defense costs incurred outside of and not subject to the procedural laws of the USA.
  • Claims against fiduciaries or administrators of any retirement or employee benefit plan.
  • Breaches of insider trading legislation.

Claim Process

In the event of a loss, the following steps should be taken immediately:

  1. Notify the insurer of the occurrence of the loss, provide a full written statement of the claim, and include the nature and extent of the loss along with an estimate. Any delay in notification may jeopardize the claim, as the insurer may deny liability for the loss or damage.
  2. Take all necessary steps to reduce and minimize the extent of the loss, damage, and liability.
  3. Identify the proximate cause of the loss and assess its type and extent, ensuring it falls within the scope of the policy.
  4. Cooperate fully with the insurer and the appointed surveyor for a proper assessment of the loss.
  5. Provide all relevant records and documentation required by the surveyor or insurer to determine the extent of the loss and liability under the policy.
  6. Submit documents such as the claim form, a copy of the policy, demand letters, incident reports, etc.