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Breaking down Directors and Officers liability insurance

Breaking down Directors and Officers liability insurance

A directors and officers liability insurance is aimed at companies’ managers. This type of insurance protects them from claims arising from the actions taken within the scope of their duty performance. As such, D&O insurance has become a regular part of companies’ risk management and it is important to have this coverage in plance as adviced by the Singapore Institute of Director.

Companies purchase Director & Officer Liability Insurance (D&O Insurance) cover because managers can make mistakes. D&O coverage includes financial protection for managers against the consequences of actual or alleged “wrongful acts”. 

Such policies offset the personal liability of companies’ directors and managers. D&O insurance may also refund the insured company in case it has already reimbursed a third party.

Therefore, D&O liability insurance raises many important challenges which companies must face: 

  • What is the amount of coverage one should purchase?
  • What is covered and who can benefit from this coverage?
  • Should small/medium sized enterprises purchase this insurance?

How can risk management protect officers from the various risks they may encounter during their business activities?In this article we will detail the scope of this type of management liability insurance. We will also answer the most common questions on this topic and help you determine the D&O coverage you should get.

The importance of D&O insurance and who should get it

The D&O cover protects companies’ directors and officers. It covers them against defence costs and the financial loss which may have an impact on your employees’ personal assets and career.

The following positions should strongly consider getting coverage from a D&O insurance to hedge their risks:

  • Past, present and future directors.
  • Directors in a non-executive position.
  • Employees in a management position.
  • Stockholders, investors, creditors and banks may consider this insurance.
  • Private companies.

Thus, D&O insurance protects a wide range of employees and sectors. You may contact us today so we can better assess your need for this kind of protection.

What are common D&O risk scenarios?

  • Employment practices and HR issues.
  • Shareholder actions.
  • Reporting errors such as Company Account.
  • Breach of fiduciary duty resulting in financial losses or bankruptcy.
  • False representation of a company’s assets.
  • The embezzlement of a company’s fund.
  • Theft of intellectual property and poaching of competitor’s customers.
  • Lack of corporate governance.
  • Failure to comply with the workplace regulation or laws.
  • Corporate manslaughter.
  • Insolvencies.
  • Creditor claims.
  • Competitor claims.
  • Claims made by the company itself are also at risk.

As you can see, D&O coverage is extensive and offers a large protection for scenarios such as the ones cited above. Protect your company and your employees as the unexpected always happens when we expect it the least.

What are the exclusions of a D&O insurance coverage?

  • Illegal act.
  • Illegal profit.
  • Property damage and bodily harm.
  • Legal action already taken when the policy begins.
  • Claims made under previous policy.
  • Claims covered by another insurance.

Although a Directors and officers liability insurance covers a wide range of issues, illegal acts are not comprised in such coverage. Moreover, this type of insurance is sometimes seen as a bit controversial. Indeed, ensuring negligence or false representation in financial statements lowers employees’ own accountability. Thus, keep in mind that D&O insurance is an amazing protection for employees in supervising positions, but its coverage is not limitless.

How we can help on your D&O insurance?

A Directors and Officers liability insurance is a great way to protect your business and its long-term expansion. As previously discussed, it will not only cover your company, but also relieve your employees. Indeed, it will offer them a greater comfort to perform their duties without living with the stress of making a mistake.

At BLACAZ, we offer solutions for corporations and individuals internationally in their insurance portfolio audit, structuring and management. Our offices are committed to securing the most competitive and viable insurance options for our members, and that includes D&O insurance.

We can help you whether you are a director or an officer of a publicly traded corporation, private company, SMEs, or a non-profit organization (NPO). Feel free to contact us today so we can assist you in your search and make sure you are getting the best D&O coverage on the market.

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