Directors & Officers Liability

For public listed companies, or private companies with a significant turnover, in order to protect their Directors and the Entity from an allegation of a wrongful act, they must consider obtaining a Directors & Officers Liability policy.

Protecting your board members, directors, and executive officers from risk. 

Directors’ and officers’ liability insurance protects your company’s directors and officers against third-party claims that result from their official actions and decisions. 

These claims can be expensive, time-consuming and require additional resources. This policy provides financial support all throughout.

A Directors & Officers (D&O) policy is made of the following sections:

Side A: Directors & Officers – providing protection for the Director’s personal assets, should the Entity be unable to indemnify the Director.

Side B: Company Reimbursement – Financial protection for the Indemnity that Entity provided to the Director.

Side C: Securities cover – Providing protection to the entity following a shareholder claim.

Directors and Officers insurance coverage is now a regular part of large multinational companies. But all types of organisations, public, non-profit, and private, may be at risk. 

Director’s and Officer’s insurance is becoming more popular, but penetration remains low due to a lack of education and awareness. Smaller companies might not believe they are large enough to be eligible for Directors and Officers insurance, this is often incorrect. this is not the case. Lawsuits are becoming more costly and can cause financial hardship for smaller companies or mid-size businesses. Directors and Officers Insurance can be tailored for SMEs with lower retentions, lower limits, and customised coverage. 

Common D&O Risk Scenarios Include: 

  • Breaches of fiduciary duties owed to the company and shareholders 
  • Shareholder actions 
  • Reporting errors 
  • Employment practices and HR issues 
  • Inaccurate or inadequate disclosure 
  • Misrepresentation in a prospectus 
  • Corporate manslaughter 
  • Creditor claims 
  • Competitor claims
  • Failure to comply with regulations or laws

      Common D&O Exclusions Include: 

      • Fraud 
      • Claims made under a previous policy 
      • Uninsurable fines and penalties  
      • Intentional criminal acts 
      • Illegal remuneration or personal profit 
      The policy covers your defence costs & the costs to dispose of a matter (by pre trial agreement or once judgement is complete). With legal costs as they are & most claims resulting in a pre trial settlement, we are recommending higher & higher limits every year.

      Legislative nightmare:

      There are currently 700 pieces of legislation that Australian companies must adhere to. This responsiblilty falls on the Company Directors, which is proving to be increasingly difficult to keep up with. Once again, the defence costs for these matters continue to rise. Thankfully, there are additional coverage extensions available, such as Statutory Liability, which covers fines and penalties following these breaches (other than Occupational Health & Safety in some jurisdictions).

      Why Is This Cover So Important?

      Australia is now one of the most litigated Countries in the world. With litigation funders financing these legal actions, the defence costs of these matters can be crippling. With most claims resulting in a pre-trial settlement, it is important to understand how your D&O policy limit stacks up. 

      Most recently, cyber-attacks have been a major problem for many Directors. They are now seen as more than an IT issue and become a crucial aspect of corporate governance. 

      Our risk management approach helps you achieve the right level Directors & Officers insurance coverage. We spend time getting to know your industry and business, then work with you to create a risk management program that will protect you both now and in the future. 

      Contact us to receive a Directors & Officers Liability Insurance quote or proposal. Our insurance brokers are experts in obtaining the insurance solution that you require. 

      The policy covers your defence costs & the costs to dispose of a matter (by pre-trial agreement or once a judgement is complete). With legal costs as they are & most claims resulting in a pre-trial settlement, we are recommending higher & higher limits every year. 

      Directors and Officers Liability Insurance FAQs 

      What does Directors and Officers insurance cost?

      The coverage you get will affect the price of  Directors or Officers liability insurance. The policy is determined by your needs, risks, and many other factors. The legal document issued by the policyholder, which outlines the terms and conditions for the insurance. It is also known as the “policy”. 

      When is Directors and Officers Insurance Needed?

      Directors and officers are constantly at risk of being sued by consumers, shareholders, employees, and other parties. It is impossible to predict when you might get sued. You should make sure they are covered under a policy. This is the legal document given to the policyholder which outlines the conditions and terms for the insurance. Also known as the “policy to combat such possibilities”. Directors and Officers insurance can be used to aid in breaching fiduciary obligations, alleged discrimination, and accounting irregularities. Tax liability, labour law offences, false statements on the prospectus of a company, and many other situations. These are just a few of the many examples. These insurance policies can be used in many situations. 

      Is Directors and Officers Insurance the Same as Professional Liability?

      No, Directors and Officers insurance is not the same as professional liability. Professional liability policy: This is the legal document that the policyholder receives that sets out the terms and conditions for the insurance. It is also known as the policy’ (like Errors or Omissions insurance and professional indemnity insurance). It protects any business that offers professional services. On the other hand, with the Directors and Officers policy, the policyholder receives a legal document that describes the conditions and terms of the insurance. This is also known as the ‘policy. It comes into force at the management level if the officers and directors of the company are mentioned during litigation. This is a key distinction. Directors and Officers Insurance covers professional liability for errors and omissions. It protects its officers and directors from being sued. Directors and Officers Insurance is responsible for responding to allegations that directors or officers have acted in a manner that violates the duties of stakeholders.

      Does Directors and Officers Insurance Cover Former Directors?

      Yes, Directors and Officers Insurance cover former directors. They are also covered for any claims made against them because of their actions in the role of director. D&O insurance covers not only the past and current directors but also future directors and other relevant parties. 

      What Amount of Directors and Officers Insurance Do You Need?

      If a company’s directors are being sued constantly, it will require more coverage than a conservative company that is less likely to be sued. The right amount of D&O coverage that you need will depend on your individual case. It depends on what type of business you own, your legal history, the products you sell, and many other factors. You don’t want coverage that is too limited, but you also don’t want excessive spending. 

      Does Director and Officer Insurance Cover Negligence

      Yes, Directors and Officers insurance covers negligence. Directors and Officers insurance covers any claims made against directors or officers if they fail to perform their duties because of negligence.