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. The management is like the vertebrate
of the company and is essential for the company’s 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 officers and directors who form 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 directors and officers 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 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.
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
- 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.
A directors & officers liability policy is a necessary requirement for every company.
Paybima is an online insurance broker from which the policy can be bought. Policies of various
general insurers are available for purchase at Paybima and you can buy a policy
after comparing it with others.