Directors and officers liability insurance (FAQ)

Directors & Officers Liability insurance (also referred to as D&O insurance) offers essential coverage for companies and non-profit organisations of all sizes against legal claims made by clients, investors, employees and other parties. Here are some of the most common questions about it answered.

 

1.What exactly is D&O Insurance?

Directors & Officers Insurance covers legal liabilities and assets in case the directors and officers in a company are sued because of alleged or actual wrongful acts committed within their positions. Errors of omission, misstatement or breach of duty may all be covered under D&O policies

 

2.Why should my company consider D&O Insurance?

If a board of directors has been assembled in either a private company or a non-profit organisation, D&O insurance is essential. In fact, investors will usually require this as a condition for funding a private company, as the cost of a possible litigation may easily outweigh the net worth of a small company. In the case of non-profits, protection is important for individuals whose personal assets may be threatened when a claim is made.

 

3.What types of claims can be covered?

a) Claims related to contractual disputes, false advertising, misleading product information and privacy violations.

b) Suits for damages from suppliers who suffered by failed promises of increased orders.

c) Assertion of claims by competitors who may assert employee poaching in order to obtain trade secrets, negligent business interference or false advertising.

d) Claims by creditors and bankruptcy trustees in an attempt to recoup losses by asserting breaches of fiduciary duties and/or misrepresentation made when applying for credit.

e) Claims by employees most usually made in cases of alleged wrongful termination, harassment or violations of wage and hour laws.

 

4.What does D&O Insurance not cover?

Though the exceptions to coverage vary depending on the kind of plan you wish to buy, there are a few things the Directors & Officers Insurance does not cover. First of all, coverage does not include fraudulent, criminal or intentional non-compliant acts. It also does not cover cases where directors acted for personal profit or obtained illegal remuneration. Finally, it will not recover wages, fines, taxes, penalties or multiplied damages.

 

5.What is the cost of D&O Insurance?

This is solely dependent on the kind of coverage you are getting and is based on an evaluation of your needs, risks and several other factors.

 

For more information, contact us at 700 70 500 or at [email protected]