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Directors & Officers Liability Insurance

Protect your company's decision-makers from liabilities and safeguard their personal assets in case of a legal lawsuit.

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Coverage worth
50 Lakhs
at just
7,000*
annually

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50+ years of collective insurance experience

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5,000 Cr+ of cumulative risks insured

What Is

Directors & Officers Liability Insurance?

Directors and Officers (D&O) policy protects directors, board members, and other individuals in management and supervisory positions from possible legal liability if they are indicted for decisions made to run a business.

This type of insurance protects the personal assets of the directors and officers along with their spouses and compensates them for any settlements or legal fees they incur as a result of lawsuits.

The 3 Categories of D&O Insurance

Direct Indemnification

1. Side A

Direct Indemnification

The D&O policy offers liability cover for company managers, officials, and directors to protect them from claims which may arise from the decisions and actions taken within the scope of their regular managerial duties.

 Company Reimbursement

2. Side B

Company Reimbursement

When a company indemnifies (provides financial protection) its directors or officers for a covered claim under the policy, Side B Coverage ensures that the company is reimbursed for the expenses they've incurred during the process. In essence, it's an insurance policy that protects the company's financial interests by reimbursing them after they've supported their insured individuals in a legal matter.

 Coverage for Entity

3. Side C

Coverage for Entity

Side C coverage basically covers the companies that are listed on the Stock Exchange. It covers the claims and liabilities arising from security-related grievances. It indemnifies the company for legal costs incurred while dealing with such claims or liabilities related to the securities traded. Thus, if the shareholders or any stakeholders sue the company for any reason related to securities traded on the stock exchange, Side C will cover costs incurred by the company in defense of the lawsuit, including legal fees, expert witness fees, and other related expenses.

Advantages of D&O Insurance

Offers protection to directors & officers

Saves personal assets from lawsuits

Important for both large and small-scale businesses

Helps attract & retain the best talent

Who Needs

Directors & Officers Liability Insurance?

Any private or public company with corporate boards or advisory committees should have a D&O policy to protect their C-suite executives. Today, company owners are vulnerable to lawsuits from regulators, shareholders, vendors, customers, competitors, employees, and government bodies. It's one of those "must-have" policies for every company because it protects them in the event of an expensive lawsuit.

What factors can affect coverage for a D&O policy?

Risk appetite

Financial background

Company size

Past lawsuit history

Business age

Why Get

Directors & Officers Liability Insurance?

A director or officer might face many types of financial risks as part of their job. D&O insurance provides an easy way to protect the interest of their senior officers and board members. The policy protects them from the following potential problems -

  • Allegations by other stakeholders or shareholders
  • Allegations of sexual harassment, discrimination, and other employment violations
  • Accounting mistakes & exposure to mergers & acquisitions
  • Regulatory investigations initiated by the government, a professional, or a statutory body
  • Corporate governance lapses

Who can Sue the Directors or Officers of the Organisation?

Suppliers

Suppliers

Regulatory Bodies

Regulatory Bodies

Other Stakeholders

Other Stakeholders

 Employees

Employees

Clients

Clients

Shareholders

Shareholders

Competitors

Competitors

Coverages & Exclusions in

Directors & Officers Liability Insurance
CoveragesExclusions
D&O insurance offers many benefits. Some of the major coverages in the insurance policy are given below -
Bail and Bond Costs
D&O policy covers the costs of securing bail and bond for directors and officers, which may be in connection with any criminal proceedings arising from their duties as directors or officers of the company.
Legal Representation Cover
It includes defense costs incurred by an insured on account of the attendance and/or provision of documents or information to any investigation, as required by the investigator.
Public Relations Cover
This cover reimburses the costs associated with managing and mitigating the negative impact on the company's reputation, arising out of duties performed by the directors and officers on behalf of the company.
Extradition Cover
This coverage protects a company if a director or officer is arrested or detained in a foreign country and the company needs to pay for the costs associated with his extradition back to the home country.
Court Attendance Costs
This coverage provides protection from reasonable costs and expenses incurred by the insured due to required attendance at court proceedings, hearings, trials, and depositions related to the defense of a claim.
Kidnap and Ransom Costs
This coverage provides relief from the costs associated with any event or connected series of events of kidnapping, seizing, or detaining an insured person by force or fraud, for the purpose of demanding a ransom.
Self-reporting Expenses Cover
This coverage helps to protect company directors and officers from the financial burden of expenses associated with self-reporting a potential violation or claim to the relevant Governmental, judiciary, or regulatory authorities.
Investigation Costs
It covers the reasonable fees, costs, and expenses incurred (with the insurer’s prior written consent) by or on behalf of an insured person, in relation to preparing for and attending an investigation.
Crisis Communication Cover
It covers the reasonable costs, charges, fees, and expenses incurred by an organization, in attaining the services of any public relations firm or crisis management firm to advise the organization for managing public communication.
Dedicated Additional Limit for Non-executive Directors and Officers
With this add-on cover, you get an extra layer of protection that is added to the overall coverage limit for non-executive directors and officers of a company.

Directors & Officers Claims Examples

Incident 1Incident 2
Employees’ Claim for Outstanding Contract
Incident
Multiple employees initiated legal proceedings against the subsidiary of a policyholder in China claiming unpaid contractual benefits and economic compensation.
Resolution
The litigation was in China and the Insurer appointed a law firm in China for translation and better defense strategy. The outcome of the litigation was favourable and only the defense cost was incurred which was reimbursed under the policy.

About Directors & Officers Liability Insurance

What is the jurisdiction/territory of the claim? Plus Icon
What limits do you need? Plus Icon
Does D&O insurance cover owners? Plus Icon
As a director or officer can you become personally liable for your actions? Plus Icon
Are directors vs directors disputes covered? Plus Icon
Are the subsidiary's board covered under the directors & officers liability insurance? Plus Icon
Who selects defense counsel for a covered D&O claim? Plus Icon
Does a small business need liability insurance for directors and officers? Plus Icon
What are the most common D&O claims? Plus Icon
What are directors personally liable for? Plus Icon
What is the difference between D&O and management liability? Plus Icon
Does Directors & Officers' liability insurance covers breach of contract? Plus Icon
Can a director of the company be sued for negligence? Plus Icon
Who is insured in D&O insurance? Plus Icon

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Your Story
Indore-based BimaKavach caters to the Business Insurance needs of Small & Medium Enterprises

This is an article by YouStory written by Palak Agarwal and published on October, 2022

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