Coverage:
The Directors and Officers liability insurance policy provides indemnity to directors and officers for legal costs, damages and expenses incurred, arising from claims brought against them personally due to any wrongful acts in their managerial capacity.
Insurance Cover A:
The insurer pays loss of each insured for any claim first made against the insured during the policy period for any wrongful act except to the extent that the company has indemnified the insured for the loss.
Insurance Cover B:
The insurer pays loss of each insured for any claim first made against the insured during the policy period for any wrongful act but only to the extent that the company has indemnified the insured for the loss
It is a claims-made policy on an un-named basis and cover applies to former, present and future members of the Board of Directors, and employees in a managerial or supervisory capacity.
General provisions of the D&O policy:
Limit of liability: This indicates the total aggregate limit available for all claims under the policy and is inclusive of defence costs.
Advancement of Defence costs: Defence costs are advanced to the insured before the final disposition of the claim.
The policy covers the company and all its subsidiaries.
Key standard extensions under a D&O policy:
Employment Practice Liability (EPL) Coverage – Coverage includes claims relating to a past present or prospective employee of the company and arising out of employment practice violations (eg. wrongful dismissal, discharge or termination, employment-related misrepresentation) or sexual or workplace or racial or disability harassment of any kind.
Representation at investigations and examinations: The policy covers reasonable and necessary fees, costs and expenses incurred for a legally required attendance by any director, officer or employee of the company at any official investigation, examination, inquiry in relation to the affairs of the company.
Any new subsidiary formed during the policy period will be automatically covered under the policy provided that the total gross assets of the new subsidiary are less than 10% of the total gross assets of the policyholder and the new subsidiary is not listed or incorporated either in the United States of America or Canada.
Outside Directorship Cover: The policy covers any claim made against an insured who is a director or officer of any outside entity. An outside entity is an associated company where the policyholder owns between 5% and 50% of ownership interest.
In the event of a public offering, the insured can opt for an Initial Public Offering extension under the D&O policy which provides for cover relating to untrue statements of material facts, omission of material facts in the prospectus, mis-representation in the offer document etc. The insured can also opt for a separate Public Offering of Securities Cover in order to ring-fence the significant and long-term exposure presented by a securities offering. This will cover the company as well as the directors and officers for securities claims brought against them in connection with the offering.
Coverage for Heirs & Legal Representative: The policy covers claim made against the heirs, estates or legal representatives of the insured in case the insured dies, becomes incompetent, insolvent or bankrupt.
Joint Property liability: The policy covers loss arising from any claim made against the lawful spouse of an insured for any claim arising out of his or her status as the spouse of an insured that seeks damages recoverable from marital community property or property jointly held by the insured and the spouse. The extension affords cover for any claim for any wrongful act of an insured and not that of the spouse.
Some exclusions under a D&O policy:
Note: Coverage, terms and exclusions of the D&O policy are briefly outlined above. For policy interpretation and details, please refer to the policy wording.
