DIRECTORS AND OFFICERS LIABILITY INSURANCE, which is very useful for the company former, directors as well as the present and future members of the board of directors. The D&O policy provides cover for the personal liability of Directors and Officers arising due to wrongful acts in their managerial capacity. Defence costs are also covered and are payable in advance of final judgment. This policy provides protection for claims brought against directors, officers and employees for actual or alleged breach of duty, neglect, misstatements or errors in their managerial capacity
Some of the specific exposures that make D&O insurance necessary for the Directors and Officers are:
Vulnerability to shareholder/stakeholder claims
Sexual harassment, discrimination allegations
Employment practice violations
Regulatory investigations
Accounting irregularities
Exposures relating to mergers and acquisitions
Corporate Governance requirements
Compliance with various legal statutes
Employees
Suppliers
Competitors
Regulators
Customers
Shareholders
Other stakeholders
Accounting irregularities
Exposures relating to mergers and acquisitions
Corporate Governance requirements
Compliance with various legal statutes
The company itself usually purchases D&O insurance, even when it is for the sole benefit of directors and officers. Reasons for doing so are many, but commonly would assist a company in attracting and retaining directors. Where a country's legislation prevents the company from purchasing the insurance, a premium split between the directors and the company is often done, so as to demonstrate that the directors have paid a portion of the premium. Problems related to income tax liability may come into play when a corporation avoids country specific liability law in order to protect its individual directors and officers through insurance.
As Indian companies foray into the global marketplace to sell their products and services or to mobilize capital, they need to purchase D&O insurance to secure protection from overseas exposures.
The basic principle underlying the acceptance of D&O insurance is that companies (and their shareholders) are best served by knowledgeable directors and officers who take strategic risks based upon the information reasonably available to them at the time the decision is made, without the threat of personal liability. By doing so, it is believed, corporations are better able to attract qualified, intelligent, and reasonable directors and officers to manage the operations of the company. Not only would this result in better returns for shareholders but also benefit society in general (due to the increased productivity, jobs created, and advancement of products due to such calculated business decisions).
Against any loss that the Organization may incur, on account of mistaken actions taken in their individual capacity as Directors & Officers in pursuance of their duties under Memorandum and Articles of Association.
Against loss arising from claims made against them by reason of any wrongful Act in their Official capacity.
Legal costs & expenses incurred with the written consent of the insurers arising out of prosecution (criminal or otherwise) of any Director / officer and attendance at any investigation, examination, inquiry or other proceedings by the authority empowered to do so.
Expenses incurred by any shareholder of the Company in pursuance of a claim against any Director / Officer, which the Company is legally obliged to pay, pursuant to an order of a Court.
Provide indemnity to the estate of, legal heirs or legal representatives of the Director / officer in the event of the Director / officer becoming insolvent.
Any bodily injury, sickness, disease or death of any person or any damage to tangible property
Dishonest, fraudulent, criminal or malicious act.
Personal guarantee.
Libel and slander
Personal injury and damage to property.
Pollution damage
Directly resulting from goods or products manufactures or sold by the company
Fines, penalties, punitive or exemplary damages.
Any circumstances existing prior to inception date of policy
The rating would vary from client to client depending upon a number of factors like the profile of the client, the Sum Insured selected, present and past functioning of the company, information in the balance sheet and annual report, degree of exposure etc., and can be decided only after analyzing the full information.
Premium depends on profile of the client, the Sum Insured selected, present and past functioning of the company, information in the balance sheet and annual report, degree of exposure etc.
