Directors and Officers
(D&O) of companies inevitably make decisions on daily basis that can
have tremendous consequences and effects on the people around them.
Most Directors and Officers try to be circumspect in their dealings.
However, it is worthy of note that even the best managers make mistakes.
So, what happens if as a director or officer, you make a
decision or take an action on behalf of your company that is seen as a
“wrongful act” – even if you were acting in good faith?
This
could result in a claim made against you for which you may be
financially liable. Such claims are deemed insurable and can be done
through the instrument of Directors and Officers Liability Insurance.
Directors’
and Officers’ liability covers Directors and Officers of companies
financially for any claims made against them in the line of duty. The
policy pays for any costs related to the claim, such as court
proceedings or financial losses that result from the event.
What is Directors and Officers (D&O) Liability Insurance?
The
Directors and Officers Liability Insurance (often called D&O) is
Liability Insurance Policy payable to the Directors and Officers of a
company, or to the organization(s) itself, as indemnification
(reimbursement) for losses or advancement of defense costs in the event
an insured suffers a loss as a result of a legal action brought for
alleged wrongful acts in their capacity as Directors and Officers.
The
D & O cover is an insurance cover for the Directors and key
officers of organizations who occupy critical roles or decision-making
positions with their personal assets exposed to any form of liability by
virtue of commission or omission in the course of carrying out their
duties as required for their roles / responsibilities.
What does it Cover? Directors and Officers Liability
The
policy covers the Loss of each Director and Officer resulting from any
Claim first made against the Director and Officer during the Policy
period for any Wrongful act of the Director in his capacity as a
Director and Officer of the Company.
Corporate Reimbursement
The
policy covers the loss of the Company resulting from any claim first
made against the insured during the policy period for any wrongful act
of the insured in the insured's capacity as a Director, Officer or
Employee of the Company.
The purpose of a D&O policy is to
provide financial protection against consequences of actual or alleged
“wrongful acts” when acting in the capacity as directors and officers of
the Company. It will pay for defense costs and financial losses
resulting from any claim made against the insured but only when and to
the extent that the company has indemnified the insured for the loss. In
addition to this cover are certain extensions.
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