Important Facts about Director and Officers Insurance
They say ‘it’s tough at the top’ and when you are a Director, this couldn’t be more true. You’re responsible, accountable and liable for legal claims, from employees, customers or shareholders. Therefore, making sure you have the right cover is crucial.
There are a range of situations which you could find yourself in, leading to a claim being made against you. Employees could be disgruntled, shareholders could be disappointed by the financial performance of their investments or creditors can be angry over defaults. These are just a few examples therefore for which you would need to ensure you had adequate Directors and Officers Insurance cover.
Probably the most crucial things you need to check your policy for include:
- Cover for harassment
- Cover for discrimination
- Breach of legislation (health and safety, data protection etc)
- Disputes as part of mergers or acquisitions
- Corporate manslaughter
In order to protect from liability within your role managing corporate entities, you will also need to check the following key conditions:
- The prior or pending litigation date – only covers claims which occurred after the policy retroactive date, pending or prior litigation date, and any are reported during the policy period
- Extended reporting period – this extends the time you can report claims in the period covered by the policy. This is usually 1-2 years of coverage, but it is important to consider the length of time which is important if you decide to cancel or to not renew your cover.
- Severability – to assure that protection continues for innocent parties who are covered in the event that directors and officers who completed the application whilst knowingly making erroneous statements or omitting crucial facts
- Subrogation – policies require the persons insured cooperate in recovering from third parties who were responsible for causing a claim to be made against the insured parties
- Personal Conduct Exclusions - these are intended to eliminate insurance protection for directors or officers who seek to profit through illegal acts, such as fraud.
Hearing some of the horror stories about action which has been made against directors or officers without adequate insurance, it emphasises the need to thoroughly check your policy when applying for all of the relevant types of cover. This will ensure that you don’t end up asking in an event ‘am I covered for this?’
It is the job of your Directors and Officers Insurance broker to strive to find you the requisite protection package for the best cover, at the best price for you. It can be a detailed and complicated type of cover, however, having a specialist broker on side will help you cut through the many different policies to find the most suitable for your business needs.