Directors and officers insurance
Directors and officers liability (D&O) insurance is a policy designed to provide protection for business executives and managers in the event that they’re accused of committing wrongful acts in their job capacity. Such wrongful acts could potentially include:
Company employees that are eligible for protection under a directors and office insurance policy could include the following:
If an executive level employee in your business is accused of a wrongful act, legal defense or compensation may potentially cause a financial strain to the business. For this reason, D&O insurance offers a layer of protection.
A D&O insurance policy could reimburse costs such as legal defense, investigation and settlement. This protection that D&O offers can vary between policies; therefore, due diligence is necessary.
D&O insurance exclusions
There are a number of circumstances that are not typically covered under a D&O insurance policy:
Do I need directors and officers insurance?
If a claim is made against your business executives, the potential repercussions could leave your business financially vulnerable. If the size and structure of your business means this is a scenario you can imagine as damaging, then D&O insurance is certainly something to consider.
As with many insurance-related decisions, attitude towards risk is a major factor that influences which policies a business decides to include in its package. It’s a good idea to assess how likely your business will come under threat from a claim made against your directors or officers. Consider the financial implications of not having the relevant protection in place, and then balance it against the cost of a D&O insurance policy.
- Breach of duty or trust - Failing to properly carry out expected or required duties
- Misleading statements - Making statements, forecasts or promises that are misleading or false, or dishonestly concealing facts
- Errors and omissions - Providing poor, incomplete or incorrect work, or failing to deliver promised services.
Company employees that are eligible for protection under a directors and office insurance policy could include the following:
- Managers
- Executives
- Directors
- Trustees
- Officers.
If an executive level employee in your business is accused of a wrongful act, legal defense or compensation may potentially cause a financial strain to the business. For this reason, D&O insurance offers a layer of protection.
A D&O insurance policy could reimburse costs such as legal defense, investigation and settlement. This protection that D&O offers can vary between policies; therefore, due diligence is necessary.
D&O insurance exclusions
There are a number of circumstances that are not typically covered under a D&O insurance policy:
- If the law is broken: e.g. fraud, intentional negligence
- Claims against a company as a whole: Traditionally, damages must be attributed to the negligence of one individual. However, some D&O policies do now provide cover for the company accused as a whole.
- Cover of another policy: If the claim can be defended under the cover of another insurance policy, then directors and officers insurance will not provide protection.
Do I need directors and officers insurance?
If a claim is made against your business executives, the potential repercussions could leave your business financially vulnerable. If the size and structure of your business means this is a scenario you can imagine as damaging, then D&O insurance is certainly something to consider.
As with many insurance-related decisions, attitude towards risk is a major factor that influences which policies a business decides to include in its package. It’s a good idea to assess how likely your business will come under threat from a claim made against your directors or officers. Consider the financial implications of not having the relevant protection in place, and then balance it against the cost of a D&O insurance policy.