Skip to main content

What is D&O Policy and Why do you need one?


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

Popular posts from this blog

AOG (Act of God) Perils Extension in CGLpolicies

      A OG (Act of God) Perils Extension in Commercial General Liability (CGL) policies refers to the inclusion of natural and unpredictable events under the coverage of the policy. AOG perils are events beyond human control, often caused by natural forces, and their inclusion can significantly broaden the scope of a standard CGL policy. These perils are not covered automatically in a CGL but have to be purchased separately as an add-on. Let us look at this aspect of CGL policies in more detail. Indian firms looking to buy a CGL policy should ideally opt for an AOG perils extension because the country is geographically prone to various natural disasters such as earthquakes, cyclones, and floods. Including AOG perils in a CGL policy will help businesses in disaster -prone areas to protect against liabilities arising from damage or injury caused during such events. AOG Perils covered in a CGL policy Earthquake Floods (including inundation, cloudburst, etc.)...
Post a Comment
Read more

Prior and Pending Litigation in Professional Indemnity Policy

  The prior and pending litigation exclusion in liability policies is a clause designed to exclude coverage for claims related to legal disputes or circumstances already known, pending, or in progress before the policy's effective date. It’s an important exclusion because it limits the insurer’s liability for events that occurred before the policy began. Here are more details about this exclusion. Purpose of the Prior and Pending Litigation Exclusion Insurers include this exclusion to avoid covering claims or disputes that were known or existed before the policy started. It ensures that the underlying policy , Directors & Officers (DnO), Professional Indemnity (PI) policy, etc., only covers new claims that arise from professional errors, omissions, or negligence occurring during the policy period and not pre-existing or ongoing legal matters. What the Exclusion Covers Prior Litigation : Any lawsuit, claim, investigation, or l...
Post a Comment
Read more

Understanding Duty to Defend and Right to Defend in Liability Insurance in India

  In a liability insurance policy, the insurance company has the duty and also the right to defend the insured. The cost involved in defending the insured does not affect the policy limits provided the policy does not state otherwise. This rule is useful because in many cases the defense costs are high when a judicial trail is involved. In some cases, the defense costs can be higher than the claim amount making the defense part of the policy more valuable. Defense costs can be higher than the claim amount particularly in nuisance cases. These are situations where a case is made against the insured party even though the liability is low. The coverage of a claim under a liability policy can vary based on the duty to defend or right to defend clause. Before buying a liability policy, one should know the difference between duty to defend and right to defend and the obligations of the insurer under each wording. Duty to defend Under the duty to defend provision in a liability in...
Post a Comment
Read more