What is Directors & Officers Liability Insurance?
D&O insurance policies offer liability cover for company managers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties.
Such policies cover the personal liability of company directors and officers as individuals (Side A cover), but also the reimbursement of the insured company in case it has paid the claim of a third party on behalf of its managers in order to protect them (Side B or Company Reimbursement Cover).
Why do Companies Purchase Directors & Officers Liability Insurance?
Managers can make mistakes – and are often personally legally liable for them. They constantly walk a fine line, making tough and complex decisions with huge impacts on the basis of the sometimes limited information available. This increased complexity in the operating environment puts managers in the firing line.
What’s coveredThe core purpose of a D&O policy is to provide financial protection for managers against the consequences of actual or alleged “wrongful acts” when acting in the scope of their managerial duties. The D&O policy will pay for;
Defense costs and financial losses.
In addition, extensions to many D&O policies also cover costs for managers generated by administrative and criminal proceedings or in the course of investigations by regulators or criminal prosecutors.
The most Common Directors & Officers liability risk scenarios include:-
- Employment practices & HR issues
- Shareholder actions
- Reporting errors
- Inaccurate or inadequate disclosure (e.g. in company accounts)
- Misrepresentation in a prospectus
- Decisions exceeding the authority granted to a company officer
- Failure to comply with regulations or laws
Who is covered?All current, future and past directors and officers of a company and its subsidiaries are covered under a D&O policy, which can also include non-executive directors.
In very specific cases like securities claims, the policy can even be extended to cover claims against the company itself. Cover is usually taken out and paid for by the company.
What is not covered
- Intentional non-compliant acts
- Illegal remuneration or personal profit
- Property damage and bodily harm (except Corporate Manslaughter)
- Legal action already taken when the policy begins
- Claims made under a previous policy
- Claims covered by other insurance
Other types of insurance cover
You will need contents insurance, sometimes known as all risk cover, for items for which you require cover out with the home. Please provide details of these items at the time of quotation to ensure that the policy provided meets with your requirements.
Accidental Damage cover provides protection against costs incurred through damage that you, your family members or visitors may cause to the structure of your Building or to your Contents. Examples of incidents which would be covered under this extension include putting your foot through the loft floor damaging the ceiling below, leaving a tap running leading to water damage or carpet spillages. Such incidents would not be included under a policy taken out to cover Standard Perils only.
Additional charges will apply and in certain circumstances this cover might not be available.
Items kept in the garage or garden sheds will be covered under the Contents section of your policy provided you have included their value in the total sum insured declared. Limits may apply to the amount that can be claimed for theft of items taken from outbuildings and additional charges may be made for certain items such as ride on mowers. Cover for motor vehicles and motorcycles is excluded. Please declare your requirements for cover kept in outbuildings at the time of quotation to ensure that the policy provided meets with your requirements.
In most cases you will need to arrange cover for your own contents and personal possessions. Please refer to your tenancy agreement to check what, if any cover is provided by your landlord.
An excess is the amount a policyholder is required to pay towards the cost of any claim. You may be asked to pay this amount to a company that has carried out repairs on behalf of your insurer, or alternatively the sum will be deducted from any settlement received.
- Ensure you declare a list of items to be insured under contents insurance including serial numbers, model, make and have the correct sum insured
- Always keep valuables safely and locked out of site to protect against the risk of theft