What is D&O Insurance?
D&O insurance policies offer liability cover for company managers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties. As such, D&O insurance has become a regular part of company’s risk management.
Companies purchase D&O cover because managers can make mistakes. D&O coverage includes financial protection for managers against the consequences of actual or alleged “wrongful acts”. Policies cover the personal liability of company directors but also the reimbursement of the insured company in case it has paid the claim of a third party on behalf of its managers in order to protect them.
Coverage is usually for current, future and past directors and officers of a company and its subsidiaries. D&O insurance grants cover on a claims-made basis. This means that claims are only covered if they are made while the policy is in effect or within a contractually agreed extended reporting period, which can extend up to another 72 months or even longer in some countries.
Coverage does not include fraudulent, criminal or intentional non-compliant acts or cases
where directors obtained illegal remuneration, or acted for personal profit.
Therefore, D&O insurance raises many important questions which companies must face:
How much is enough? What and who is covered – and not covered? Should small-to-medium sized enterprises (SME) purchase D&O? What does the typical program look like? How can risk management protect officers from the many perils they face in today’s business environment?
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