Corporate and personal liability protection
In today's business climate of corporate transparency and accountability, an organisation's officers and directors face a myriad of exposures.
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.
D&O Fills The Cover Gap
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:
- cover for individual directors and officers;
- reimbursement to the organisation for a contractual obligation to indemnify directors and officers that serve on the board; and
- protection for the organisation or entity itself.
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:
- entity cover;
- payment priority for insured persons;
- severability of the insured as well as severability of the application;
- cover over time, meaning cover responds to past, present and future directors and officers;
- pay on behalf clause; and
- duty to defend clause
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.
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