What Is Directors and Officers Liability Insurance?
Directors and Officers (D&O) Liability Insurance sometimes abbreviated to D&O insurance offers financial protection for company executives from personal liability for actual or alleged ‘wrongful acts’ in their capacity as corporate officers.
It can indemnify your executives, directors and managers against personal financial loss and reimburse the costs of legal representation incurred in defending claims made against them for alleged wrongdoing. It can also cover the reimbursement of an insured business in the event that they have paid a claim made by a third party to protect the director. Even if the claim is ultimately proved wrong, the defence costs of such litigation can be significant.
Increased corporate governance and regulatory requirements for many sectors in Australia mean that company directors and officers are exposed to greater risks of claims being made against them by shareholders, employees, investors, regulators or other third parties.
Consider the recent raft of cyber attacks on Australian businesses and the impact of their top executives. Individuals in an organisation can be held personally liable for such events. For this reason, Directors Liability Insurance has become an important component of many business insurance policies. AIB can provide a policy tailored specifically to your business needs, industry and budget.
Who Should Consider It?
Whether you operate a public, private or not for profit business, Directors and Officers Insurance can provide peace of mind for your board of directors. It can also help you continue to attract top flight talent to work for your business.
Directors Liability Insurance isn’t just a ‘board of directors insurance’ for large corporations or public companies. In fact, smaller businesses are more vulnerable to the financial impacts of litigation and not having adequate insurance protection, as they are less likely to be able to absorb any losses. If you have a board of directors or senior managers making key decisions in the management of your organisation or the presentation of financial information, we would highly recommend that you consider Directors Liability Insurance to protect their personal assets and your business from financial loss.
Businesses in the following sectors should consider whether D&O insurance cover is appropriate and relevant for them:
- Retail and wholesale
- Manufacturing
- Construction and building companies
- Finance or mortgage brokers
- Engineers and project managers
- Health and medical services
- Finance planners
- Accounting firms
- IT Companies
This list is not exhaustive however so it is worth checking with one of AIB’s Business Insurance advisors if you would benefit from including this in your policy.
What It Can Cover
Every policy is different and AIB can ensure we find a policy that is specifically tailored to your needs. Where financial liability is the sole responsibility of an executive, Directors and Officers insurance can fill a gap where indemnification may not apply. Typically a policy can cover:
- Legal representation costs should an executive be involved in an investigation regarding a company’s affairs.
- Legal costs and expenses involved in defending a claim
- Compensation costs that insured persons may be required to pay in the settlement of a Directors and Officers claim
Directors Insurance doesn’t cover intentional non-compliant acts, fraud or other criminal activity.
