Directors and Officers (D&O) of companies are exposed to significant personal liability when they carry out their duties in relation to their company. The exposures facing D&Os are unique and complex. Any action taken by a board member can be legally challenged by a third party. They can be held liable for their own actions as well as the actions of others.
Although a company is operated for the benefit of its shareholders, there are also employees, creditors, customers, regulators, and others who are all potential plaintiffs against D&Os.
In addition, D&Os are facing increasing regulation and scrutiny in the current economic climate, particularly following the collapse of many high profile companies
It is worth noting that even if the D&Os are innocent, the defense costs of a D&O action can put personal assets at risk. It should be noted that intentional illegal acts are typically not covered under a D&O policy.
Therefore, Directors and Officers Liability insurance is an important consideration for all Directors & Officers.
Why you should consider it.
We strongly recommend that organisations that have director or officer roles, should consider D&O insurance.
With so much governance and regulatory surveillance in place today, company directors and officers are under increasing pressure to carry out their duties and obligations to the letter of the law.
When they don’t, it can lead to personal liability for the individual director or for the entire board of directors.
What does it cover?
D&O liability insurance can protects the personal assets of corporate directors and officers and their spouses in the event they are personally sued by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts in managing a company.
The insurance which usually protects the company as well, covers legal fees, settlements, and other costs. D&O insurance is the financial backing for a standard indemnification which holds directors and officers harmless for losses due to their role in the company.
It is important to note that many officers and directors will want a company to provide both indemnification and D&O insurance.
What isn’t covered?
As with any insurance there are limits to coverage.
Generally, D&O policies have Kina-amount limits as to the various claims insured.
This may involve an aggregate limit for all claims under the policy (i.e., the maximum amount the insurer has to pay under the policy) and sub-limits for particular types of claims.
Please talk to us about what may or may not be appropriate for your coverage.
As Insurance is a complex subject, please talk to us now for professional advice and to make sure your level of coverage is appropriate, adequate, and sufficient to your requirements.
The List of Risks or the range of insurances available is not exhaustive, if there are any particular risks that are possibly unique to your type of business and/or for any specific or special requirements, please seek our assistance and guidance.