DIRECTORS AND OFFICERS LIABILITY INSURANCE

INTRODUCTION TO D&O

Directors and officers of companies hold positions of trust and they have responsibility to their company, the shareholder, the employees, the public at large etc. They may become liable to pay damages for wrongful acts like failure of supervision of the affairs of the company etc.
Apart from common law responsibilities, the duties of directors under the companies Act relate to prudent management of the copmpany.

Liability of Directors and Officers

Directors and Officers may be liable to

Employees eg. Unfair dismissal
Shareholders
Creditors
Government regulatory bodies
Members of the public etc

Coverage

The Policy shall cover “Loss” which means legal liability of the Directors or officers to pay damages or costs awarded against them and costs and expenses incurred by the directors or officers with the written consent of underwriters in respect of investigation, defence or settlement of any claim.

Here a wrongful act shall mean any actual or alleged breach of duty, trust, neglect, error, misstatement etc attempted by any director or officer

The coverage is granted in two Parts

A) To the Directors and Officers
B) To the Company its self

Coverage A

The policy pays compensation on behalf of the directors or officers of the company for loss arising from any claim by reason of any wrongful act committed in the capacity of Director or Officer of the company.

Coverage B

If a company pays the loss of an insured person due to any wrongful act of the insured person, the insurer will reimburse the company for such loss.

This may be due to Common Law, or Memorandum and Articles of Association. This is known as Company Reimbursement Provision.

Exclusions

Known Claims & Circumstances
Bodily Injury / Property Damage
- these are generally insured under other insurance policies
Pollution
Improper Personal Gain or Profit
- exceptions for innocent Directors
Nuclear / Radiation
USA / Canada -Territory / Jurisdiction
Insured versus Insured
- Employment practice related
- Shareholder Derivative Action
- Receivers & Liquidators
Major Shareholders
- varies by involvement of the Major Shareholder
Prospectus Liability
- Can be specifically underwritten
Fines, Penalties, Punitive and Exemplary Damages
Trustee Liability / Employee Benefits
- can be separately insured: Trustee Liability
Intentional Wrongful Acts, Fraud, Criminal Acts