Directors and Officers insurance FAQS

Q. What does a D&O Policy Cover?

A. Directors and Officers Liability Insurance protects company directors and officers against claims arising from their wrongful acts whilst managing their business.

Q. What is an officer of a company?

A. An officer can be any individual within a company who makes decisions which affect the company. The title “officer” depends on what an individual does rather than what he is called.

Q. What D&O limit of indemnity should you buy?

A. The limit of indemnity chosen by you should be a combination of what you perceive your exposure to be and how much you are prepared to spend. Remember that this insurance protects your personal assets.

Q. Is corporate liability the same as corporate reimbursement?

A. No. Corporate reimbursement reimburses the company when the company when the company has paid indemnity or defence expenses on behalf of one of its directors or officers; it is included in most directors and officers policies as standard. Corporate Liability cover extends the policy to include protection for the company’s own liability and defense expenses.

Q. What are the differences between a D&O policy and a legal expenses policy?

A. There are many differences; a D&O policy will include cover for compensation awards and settlements as well as the cost of the defense whereas a legal expenses policy will only usually cover the cost of defense. Most legal expenses policies include a “prospect of success clause”, this says that, if in the opinion of the insurer the likelihood of winning the case is less than 50% they will not offer cover. Your D&O policy has no such clause will respond regardless of likely outcome. Legal expenses insurers will insist upon use of their own in house counsel and the Insured is required to immediately notify the Insurer of any potential claims without taking any action whatsoever. If the Insured deviates from these rules or responds in any way to the claimant, cover may again be denied with the Insurer claiming that any possible defence has been prejudiced. Whilst your D&O insurer will still require notice as soon as possible, any contact prior to such notice will be considered and any potential resulting prejudice will be assessed prior to a coverage position being determined. Investigation costs and expenses are covered by both legal expenses and D&O policies although a legal expenses policy will specify for which organisations investigation expenses are included whereas our D&O policies do not limit this. A D&O policy will not cover any prosecution costs.

Q. Does a D&O policy include employment practices liability cover?

A. Our Directors & Officers Policies provide employment practices liability for individual Directors and Officers as standard, however, this only extends to claims made against Directors or Officers personally. In order for the company to be protected against employment practices claims they will need to purchase our Employment Practices Liability Extension. Nearly all employment practices claims are bought against the company but very few will specifically name a director or officer.

Q. What happens if the insured has bought the corporate liability extension and the company uses the entire policy limit defending themselves, will the directors and officers be without cover?

A. Our Corporate Liability Extensions has an additional limit for unindemnifiable loss which applies solely to claims made against individual directors or officers should the policy limit be completely eroded. The limit available for this extension is 50% of the policy limit subject to a maximum aggregate limit of £250,000.

Q. Does the D&O policy cover investigation costs?

A. Our D&O policies cover the defense costs involved in any “formal” investigations initiated by any organisation. It is important to note that this does not extend to the internal investigations initiated by any organisation. It is important to note that this does not extend to the internal investigations initiated by the company itself.

Q. Is Corporate Manslaughter covered?

A. Where the policy has been extended to include corporate liability the policy will respond to allegations of Corporate Manslaughter.

Q. If there are several companies under the same ownership can they all be covered under one policy?

A. Our D&O Policies include cover for subsidiary companies where the holding company is named as the Insured. Therefore, to ensure that cover is in place for all subsidiaries it is vital that cover is purchased in the name of the holding company and that the turnover disclosed is the consolidated turnover for all operating companies. If a policy is taken out in the name of any subsidiary company neither the holding company nor any other subsidiaries (other than any subsidiaries of the named Insured company) will be covered.

Q. Why do I need to provide a signed and dated declaration?

A. The Declaration needs to be signed and dated by the Insured as this confirms the statements of fact upon which quotations and policies are provided and confirms that all material information has been disclosed. This information is relied upon when insurance is quoted, determining the premium payable by the insured and assessing the applicable terms and conditions for the policy.

Article source: http://www.angelunderwriting.com/ResourceCentre/AngelFAQ/DirectorsandOfficersFAQ.aspx