Why Do Directors Need D&O Liability Insurance? ~ Insurance Academy

Why do directors need Directors and Officers Liability insurance? There are several reasons why directors and other incumbents in the company need this insurance. These reasons include:

• Great responsibility and accountability of directors and commissioners. Directors and Commissioners can be sued personally by shareholders, creditors, customers, employees or by the general public at large, if they fail to carry out their duties and responsibilities in running the company.
• Supervision and regulations are getting stricter. Supervision and regulations implemented by the Government and Industry are increasingly stringent. Not only strict, but sometimes these regulations confuse business actors because there are many interests involved and sometimes there is overlap between one regulation and another.
• Increasing public legal awarenessso that the aggrieved party tends to exercise their rights to sue in court.
• Directors & Officers must also maintain their reputation, integrity and assets from lawsuits by parties who feel aggrieved
• The legal process can be very serious, expensive and tiring. The Director & Officer must ensure a competent and qualified lawyer to defend their interests.
• With “Directors’ & Officers’ (D&O) Liability” Directors & Officers will be more confident in facing business challenges because they have financial back-up to deal with claims and legal proceedings.

[gambar: yukonchamber.com]

D&O Liability Guarantees are as follows:

• Libel and Slander: defamation either through writing or orally
• Intellectual Property: infringement or unauthorized use of intellectual property rights
• Employment Practice Liability: lawsuits from employees in relation to cases of dismissal, discrimination and sexual harassment
• Blanket Subsidiary Cover: automatic guarantee for all subsidiaries
• Official Investigation and Inquiries: legal fees to assist directors and officers in the investigation, investigation and investigation process
• Severability and Non-imputation: guarantee applies separately to each director and officer
• Additional Notification Period: a longer reporting period for extra claims if the policy is no longer extended
• Previous Security Offerings: guarantee against previous offers/prospectus
• Advance Payment of Defense Costs: upfront payment for legal fees and attorneys in defense of claims

Additional Features (expansion of coverage with additional premiums) in D&O Liability Insurance include:

• External Positions (Outside Directorships): guarantees against directors and officers in organizations or associations (outside the company) where they represent the company
• Pollution: legal liability arising from pollution
• Joint Venture Liability: legal liability arising from the formation of a joint venture
• Prospectus Liability (for current or future offerings): guarantee against the offer / prospectus that is being and will be carried out.
• Entity Cover: guarantee against the company as an entity

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D&O Liability Insurance closing documents

To cover D&O liability insurance, the prospective insured must fill out a proposal form and submit a financial report. From there, all information related to the line of business or services provided, total income, claim history, and others are asked for underwriting consideration.

The terms and conditions of coverage are determined based on the information provided (including but not limited to) on the following factors:

• The line of business or services provided – whether it is in the low, medium or high risk category, industries such as hi-tech, telecommunications, and financial institutions are included in the high risk category.
• Total assets and income – the larger the assets and income, the higher the risk level
• USA/Canada exposures: does the company do business or security listing in USA/Canada
• Listing Status: is the company listed on the stock exchange, on any country’s stock exchange
• Merger and Acquisition: does the company have a merger or acquisition?
• Client’s claim history – has there been a claim, type, and amount of loss
• Limit of liability and deductible requested

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