Directors and Officers Liability Insurance for Your Business
A comprehensive solution for protection of your founders, officers and board members from personal liabilities
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What is Directors and Officers (D&O) liability insurance
There are two types of directors and officers insurance policies - business policies and personal policies. The business policies cover the liability of directors and officers of the business. Personal policies cover the liability of directors and officers of an individual or a sole proprietorship.
Directors & Officers Insurance provides insurance cover for directors and officers of a company. The policy typically covers wrongful imprisonment, libel, slander, and bankruptcy.
It also covers financial damage caused by stock manipulation, antitrust violations, and insider trading.
The policy's premium cost will depend on the company's size and industry.
In some countries, directors' insurance is a mandatory insurance requirement for companies.
Why do you need directors and officers liability insurance
Shields your company from liabilities that may arise due to unforeseen wrongful acts. Your company and board is protected for liabilities that can arise from unforeseen wrongful acts.
Secures your business and its key decision makers against risks and financial repercussions arising out of managing a company.
Helps with compensation towards litigation, settling lawsuits, official inquiry, and other claims.
Makes your company a better and more protected business to invest in.
Complies with the Companies Act, 2013 and its primary recommendation.
Facilitates better governance practices by providing cover in the case of genuine default.
What does D&O liability insurance cover
Protects the personal liability of Directors & Officers and protects executives from claims when corporate indemnification is not available from their company.
Judgments & settlements
Covers settlement payouts when it comes to larger liability claims.
Third party claims
Covers costs incurred to protect the directors & officers against a third party in accordance with its corporate indemnification obligations.
Safeguards against costs incurred to conduct an official inquiry or investigation, or represent the insured at such inquiries.
Covers costs of legal representation and lawful compliance consultancy.
Shields corporate entity against the claim filed by the shareholders in connection with buying and selling or ownership of securities.
How is D&O liability insurance cover better with Plum
We understand the rapidly changing business environment and can advise you with respect to people & business related insurance requirements.
Compliant with regulations
Our advisors offer the top relevant options conducive to your business setting ensuring compliance with The Companies Act, 2013 and its various amendments.
We provide you with the best premium options in the market.
Our team will walk you through each inclusion and exclusion in detail and conduct a highly transparent process for building the right coverages and plans
Ease of claims settlement
We assist and aid the claim process by liaising with the insurers/legal counsel and team of experts.
Guide to good practice
We help you set up a guide on best practices followed in the industry to protect against such incidents.
D&O Insurance for Small & Medium-Sized Companies
Directors & officers insurance (D&O insurance) provides liability insurance coverage for individuals who act as directors or officers of a company. This insurance is designed to protect companies from litigation expenses, loss of income, and other legal costs if a director or officer does a wrongful act.
D&O insurance can cover wrongful acts such as fraud or financial mismanagement.
A small and medium business owner should understand the different types of D&O insurance available and their differences. They should discuss their business needs with an expert in D&O insurance before deciding.
D&O insurance can be expensive, so small and medium business owners should consider whether it's the right coverage for their business. There are many factors to consider, including liability limits and additional coverages such as directors' liability insurance, public liability insurance, and employment practices liability insurance.
Small and medium business owners should also be aware of any exclusions/limitations that may apply to the policy they purchase. Understanding the policies terms and conditions is vital before signing up for coverage.
Frequently asked questions
Who is included under D&O liability insurance?
D&O Liability Insurance covers:
- Directors and officers employed by the organization
- Directors and officers of subsidiaries
- Non-executive or independent directors
- Risk managers
- Supervisors and managers
- Company secretary and CA
- General counsel
- Important executives managing a team
Who can buy D&O cover?
Any privately or publicly held company with a corporate board or advisory committee
How do I customise D&O cover?
A D&O cover can be quite exhaustive in nature and we, at Plum, help you customise the same as per your business settings. These requirements could either stem from a compliance or risk management perspective. Key customisable features include:
- Sum Insured - Defining the right limit of liability for the organisation
- Coverages - Side A, B and C. We can add more clauses and coverages by paying extra premiums.
- Territory - Can cover India, US and rest of world
What are the components of a D&O Cover?
- Side A - Directors & Officers Cover: This component covers the personal liability of Directors & Officers
- Side B - Company reimbursement claim: This covers the extent of losses incurred by the company to protect the directors & officers against the third party
- Side C - Company securities claim: This protects the company against the claim filed by the shareholders in connection with buying and selling or ownership of securities
- Add-on - Employment practice liability: Protect for losses incurred by insured in case of a suit by past, present or prospective employee in relation to “employment wrongful act
Can a member of the board of directors be sued or subject to a lawsuit?
Yes, as per the Companies’ Act, the director or officer can be alleged and held personally liable for their actions. Here are certain instances where litigation can be brought upon by:
- Employees - Accusations towards conduct of discrimination, harassment, wrongful termination related acts
- Creditors - Accusing the director of taking on debt even after knowing that the company is insolvent
- Competitors - Misleading and deceptive conduct/sabotage towards the competition
- Regulators/Gov. Bodies - Citations towards defiance of statutes
- Customers - Third party or financial implications to our customers due to services rendered or decisions taken in the day to day functioning of the business
- Shareholders - For mismanaging funds/ ops of the company which went against the interests of the shareholders
Are my personal assets at risk if I serve as a director or officer or a member of board?
Yes, a director’s liability is unlimited under certain circumstances wherein they could be held personally liable on behalf of the company. E.g. - An instance wherein there is a of breach of fiduciary duty
Do I have to buy a different policy for each director?
No. A blanket D&O for the organisation covers all the key stakeholders and directors.
What is the duration for a D&O liability policy?
A standard and typical tenure for a D&O policy is 1 year.
Should small businesses take insurance D&O liability insurance policy?
Younger organisations just starting-up carry a much larger risk wherein any inadvertent expenses, may disturb the entire financials of a company, and more importantly destroy the reputation of such a company in the market, making it all the more difficult for one to survive.