In the light of the recent cases of financial fraud and
claims of bankruptcy made by organizations, many companies are showing an
interest in insurance policies that will cover the liabilities of officers and
directors. This insurance policy is known as Directors and Officers (D&O)
Liability Policy.
Overview
The directors and officers of corporations are answerable to
their shareholders, employees and the public and a wrong decision poses the
risk of civil or criminal action against them. A D&O policy covers a wide
range of civil and criminal actions that can be taken against directors and
officers.
This policy protects against legal claims as a result of
wrongful actions by directors and officers while performing their duties. These
wrongful acts can include errors, omissions, misleading statements, breach of
duty or their neglect.
The policy covers any losses that the insured may face due
to any legal action for any wrongful acts committed by them. It also covers
civil fines & penalties arising out of regulatory overstepping. The policy
covers any defense costs that result from any criminal or regulatory
investigations or trails the directors might face. The policy primarily provides
coverage for the personal liabilities of the officers and directors of the company.
It also provides coverage to the liabilities of the company in certain limited
circumstances. More importantly private
equity investors consider a D&O policy as a pre-requisite for their
investment.
The changes to the Companies Act that have increased the
duties, responsibilities, liabilities
and obligations of independent
directors and the recent corporate actions has evoked interest for independent
directors to have this policy.
Who is covered in
this policy?
Apart from directors and officers in the organization, those
covered in this policy include independent and non-executive directors (past,
present & future), risk managers of the company, employees in supervisory
or managerial capacity, and secretaries.
Important features
While the policy
covers the legal liabilities due to any wrongful acts of directors and officers
it does not cover damage of property, bodily injury, discrimination or
dishonesty by the insured or defamation of character.
The claims of the liability are covered only if they are
made within the time frame of the policy and each policy has a stipulated
period.
Benefits of the
policy
The benefits of having such a policy include:
·
Coverage for losses due to wrong decisions taken
by the directors or officers
·
Provision of indemnity to the legal heirs or
representatives of the director or officers in case they are declared insolvent
or bankrupt
·
Coverage of legal expenses due to prosecution of
the directors or officers
·
Coverage of defence expenses which does not
diminish the overall limit of liability
·
Coverage of insured persons against cases of
sexual harassment, wrongful termination, and other acts that may be harmful to
the organization
·
Coverage of a wide variety of claims for
comparatively lesser amounts
Having a D&O insurance policy is not only beneficial to
organizations but also an important risk mitigation tool. In the wake of the
recent cases involving company directors many organizations are considering
this policy for their directors.
To
know more about D&O Liability policy please visit www.zeninsure.com or send your queries to enquiries@zeninsure.com or call us at +91 9848884363. We would be glad to help you out.
Comments
Post a Comment