Directors and officers hold a position of trust and are responsible towards the company, the shareholders, the employees, and the public at large. This cover is suitable for those Directors & key officers who are in a decision making position. The D&O policy provides cover for the Personal Liability of Directors and Officers arising due to wrongful acts in their managerial capacity. This policy provides protection for claims brought against Directors, officers and employees for actual or alleged breach of duty, neglect, misstatements or errors in their managerial capacity. The legal liability including costs to defend any civil and/or criminal action against the Directors and/or Officers holding a responsible position are covered.
Scope of Cover
The legal liability including costs to defend any civil and/or criminal action against the Directors and/or Officers holding a responsible position towards any loss that the Organization may incur on account of wrongful actions taken in their individual capacity as Directors& Officers in pursuance of their duties under Memorandum and Articles of Association are covered. This action may be brought against the Directors and/or Officers by Shareholders, own Employees, Customers, Competitors or Members of the public or even regulatory authorities.
Legal costs & expenses incurred with the written consent of the Insurers arising out of prosecution (criminal or otherwise) of any Director / officer and attendance at any investigation, examination, inquiry or other proceedings by the authority empowered. Expenses incurred by any shareholder of the Company in pursuance of a claim against any Director / Officer, which the Company is legally obliged to pay, pursuant to an order of a Court.
Parent company and existing subsidiary companies are covered. Jurisdiction applicable is of India but can be extended to cover worldwide.
Advancement of Defence costs
Claims must be made during policy period
Right to defend cover
Cover for Subsidiaries
Outside Directorship coverage
Cover for Retired Directors
Employment Practice Liability (EPL) cover for Directors and officers
Cover for failure / negligence to supervise against any Professional Indemnity related claims
Cover for Regulatory Crisis Response
Cover for Assets and Liberty Costs including prosecution, bail bond and civil bond expenses
Cover for damage to reputation
Cover for Heirs, Estates and Legal Representatives
Bilateral Discovery Period
Special excess protection for non executive Directors
Insured vs Insured (defence cost cover)
Add on covers (Extensions)
1. Advancement of Defence Costs
Without this extension, an organization or its executives may be required to fund their own defence costs until an Insurer can assess the claim and reimburse them. This is typically a time-consuming process and can take months or even years. It should be noted that, if the claim is not covered under the Policy, the policyholder would be required to repay any defence cost advancements.
2. Retired Directors and Officers. It is a claims made Policy & organizations must have an active policy when a claim arises in order to cover an incident. Since some claims may take years to arise & a company’s retired executives can be left without cover. Retired Directors and officers may not have control over an organization’s insurance and therefore this extension will help retired Directors & Officers.
3. Outside Directorship
In some cases, Directors and officers serve on boards of outside organizations. This often occurs when an executive takes a leadership position for an external non-profit. This extension is particularly useful, as it ensures that executives will be covered in the event that their non-profit’s insurance is insufficient or completely exhausted.
4. New Subsidiaries
The new subsidiaries extension is meant to address this concern, automatically covering any new subsidiaries and providing them with the same protection as the parent organization. Coverage only applies to claims that arise following the date of an acquisition.
5. Spouses, Heirs and Legal Representatives: Provide Indemnity to the estate of legal heirs or legal representatives of the Director / officer in the event of the Director / officer becoming insolvent
6. Other Common Extensions
In addition to the extensions above, there are a number of less common, but important, extensions to be aware of. The following are just some examples:
7.Civil or bail bonds. This extension can help cover the cost of civil or bail bonds, allowing a Director or officer to be released from custody.
8.Public relations expenses. Following a D&O claim, companies may have to rebuild or protect their reputation. A public relations expenses extension covers the cost of engaging a public relations firm to improve public opinion.
9.Deprivation of assets. This extension gives executives funds for housing, utilities and personal insurance services. This coverage is especially useful if an executive’s funds are frozen.
10.Extradition costs. This extension covers the defence costs associated with opposing an extradition proceeding, including any bail process and subsequent trial.
11.Joint ventures. This extension provides coverage for claims arising from joint venture operations.
The limit of liability is selected by the policyholder when applying for coverage, and will vary depending on the individual requirements of the organisation. The policy limit generally operates on an aggregate basis, and is in addition to the initial deductible or retention paid by the policyholder. As the limit of liability is typically inclusive of defence costs, companies must ensure that they consider these expenses, in addition to the cost associated with settling claims.
Premium chargeable depends on the: Profile of the client, the Sum Insured selected, present and past functioning of the company, information in the balance sheet and annual report, degree of exposure etc.
Others factors include
Limits of Indemnity, Management perception to various stakeholders
Capital structure of company: Source of shareholder funds - foreign v/s domestic exposure, debt structure.
Credit rating of the company to honor future financial commitments, Clientele of the proposer
Annual turnover, Auditors of the company, Information gathered about the company from public source
Any bodily injury, sickness, disease or death of any person or any damage to tangible property
Dishonest, fraudulent, criminal or malicious act.
Libel and Slander
Personal injury and damage to property.
Directly resulting from goods or products manufacture or sold by the company
Fines, penalties, punitive or exemplary damages.
Any circumstances existing prior to inception date of policy