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Directors and Officers Liability Insurance (D&O)

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.

Exclusions

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.

A directors & officers liability policy is a necessary requirement for every company. Paybima is an online platform 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.