Claims can come from many sources, employees, regulators, shareholders, creditors, customers, etc. Ever-changing regulations, increased employee awareness of employment rights and the rise of shareholder activism means directors are more frequently at risk, translating to rising claims and escalating settlement cost.
Unlike liability policies that provide cover for claims arising from property damage and bodily injury, a D&O policy specifically provides cover for a "wrongful act," such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.
A D&O policy provides defence costs and indemnity cover to the entity listed on the policy declarations, which may include:
Indemnification provisions are typically included in the charter/bylaws of a company. While an important risk component, small to medium-sized enterprises or not-for-profit organisations often do not have the financial resources to fund the indemnity provisions, making the bylaws hollow. A D&O policy can provide an extra blanket of security in the event of a covered loss.
There are also additional forms of cover to adequately protect directors and officers, including:
Whether you're a not-for-profit, privately held or a public company, it is likely that your business can benefit from a D&O policy. Since there is no such thing as a "standard" policy, a professional broker is invaluable when purchasing D&O cover. We understand your organisation and can knowledgeably help design policy language to meet your needs.