Director and Officers Liability Insurance
Director and officer liability insurance, also known as D&O insurance, provides financial protection to directors and officers of a company in case of lawsuits brought against them from decisions and actions taken in the scope of their duties.
D&O Liability Regulations in India
In India, the Companies Act of 2013 has provisions related to directors' liability, which makes it essential for companies to have D&O liability insurance to protect their directors and officers from legal claims.
Is D&O Liability Coverage Necessary?
No, such insurance is not mandatory but is highly recommended as it protects the personal assets of directors and officers and provides financial protection against lawsuits, investigations, and other legal actions.
Benefits of Director and Officers Liability Insurance
Provides financial protection to directors and officers against legal claims arising from alleged wrongful acts.
Covers the cost of defending against claims.
Offers protection against damages and settlements awarded by courts.
Provides worldwide coverage for directors and officers of the company.
Inclusions in Director and Officers Liability Insurance
Protection against lawsuits, investigations, and legal actions against directors and officers.
Coverage for personal assets of directors and officers.
Protection against claims of breach of fiduciary duty, breach of trust, misstatement or misleading statement, defamation, libel or slander, act of omission or negligence, mismanagement, and other wrongful acts.
Inappropriate workplace conduct or in process employment acts of alleged discrimination, retaliation, defamation, failure to promote, sexual harassment, etc.
Coverage for both private and public companies.
Exclusions from Director and Officers Liability Insurance
Claims related to fraud, intentional wrongful acts, or criminal acts.
Claims related to violations of antitrust laws or competition laws.
Claims related to pollution or environmental damage.
Claims related to employment practices, such as discrimination or harassment.
Claims related to bodily injury and property damage.
Claims related to public/private offering of securities.
Claims related to those made by major shareholders against the insured.
Policy does not cover salaries, wages, personal expenses, benefits or overhead expenses of the insured.
Cost of obtaining Director and Officers Liability Insurance
The cost of D&O liability insurance depends on various factors, such as the company's size, the industry it operates in, the coverage limit, and the risk profile of directors and officers.
Pre-Conditions to Buy Policy
The application must be approved by the board of directors.
The company must have a risk management program in place.
The company must disclose any known or potential claims against its directors and officers.
Documents Required for a claim under Director and Officers Liability Insurance
- The claimant must provide written notice of the claim.
- The claimant must provide all the relevant documents and evidence supporting the claim.
- Audit report of the insured’s company and share holding pattern.
- The insurer may require additional documentation, such as financial statements or corporate documents.
- Other details, as might be required by the insurance company.
