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Directors and Officers (D&O) Liability Insurance

The management of a company is an essential part of the organization. It makes executive decisions and ensures profitability of the company. It is like the company's vertebrate, an essential component for growth and stability. A company is not formed of parts but of humans working in different capacities. As humans are prone to mistakes, a company finds itself exposed to risks and losses due to mistakes committed by its management. A company might face grievances due to errors of their directors and officers which results in huge lawsuits and fines. Is there a way to cover this risk?

A Directors & Officers Liability Insurance Policy covers the risk faced by the company for mistakes committed by its senior management which might result in a financial loss. But, from whom can a grievous claim be made on a company? A business entity works with different parties and each party presents the risk of claim. The company's shareholders, creditors, customers, suppliers, tax authorities, regulators, other employees and even the Government might raise a claim.

Coverage under Directors & Officers Liability Insurance Policy

The D&O Insurance Policy covers losses for claims against directors and officers which the company is allowed or required to indemnify as well as losses for which the company is not able to provide indemnity. The losses covered under the policy include the following:

  • Bail bonds and civil bond expenses
  • Aggravated damages
  • Cost of defense of the directors and officers
  • Expenses on Public Relations
  • Prosecution expenses
  • Extradition expenses
  • Costs incurred in legal representation of the covered persons
  • Damages, settlements and judgments and interests for exemplary and punitive damages.

Exclusions under Directors and Officers Liability Insurance

Besides the extensive coverage provided under the D&O insurance plan, there are some exclusions and losses not covered under the plan. These include:

  • Personal guarantee
  • Libel and slander
  • Fraudulent, dishonest, malicious or criminal acts committed by the directors and officers
  • Personal injury and property damage
  • Pollution damage
  • Damages or losses resulting directly from goods and services manufactured or sold by the company
  • Fines or penalties except pecuniary penalties, etc.

Extensions available in Directors and Officers Liability Insurance

Extensions are additional coverage features which you can buy by paying an additional premium. A D&O Insurance Policy offers a variety of extensions for you to make your coverage more comprehensive. Extensions for the following instances can be found in popular D&O insurance plans:

  • The legal costs incurred by a company in legal representation of the insured individual, if not already covered
  • Claims made by the shareholders of the company
  • Coverage for directors and officers of another company
  • Costs incurred in engaging the services of a Public Relations manager and reducing any possible negative publicity
  • Any extradition costs incurred
  • Coverage of emergency costs on a retrospective basis
  • Coverage for defence costs incurred in pollution related claims made on the insured members
  • Automatic cover for any new subsidiary of the company and its directors and officers
  • Coverage for counselling costs incurred in the counselling of the directors and officers
  • Coverage for legal heirs, spouses, executors or representatives of the insured members
  • Extension of the policy period beyond 12 months

D&O Insurance is a Necessity

A Directors & Officers liability policy is a necessary requirement for every company. D&O insurance helps in protecting the personal assets of the directors and officers of a company in case a claim is made against them. It also safeguards the company's finances against huge legal costs incurred due to any mistakes made by the company's key personnel. Thus, the policy benefits both the business organisation and its employees against possible financial losses.

Being an important cover, a D&O insurance policy is offered by many general insurance companies making the task of choosing the best policy difficult. Paybima makes your work easier. It is an online insurance broker facilitating the comparison of difference policies as well as easing the process of buying one. Policies of various general insurers are available for purchase at Paybima and we recommend, you compare coverage and cost of premiums between policies before buying one. Browse our D&O page and find the best policy and insurance quote to safeguard your management from claims and losses.

Read More - Need of a D&O Insurance Policy