A Directors and Officers Liability Insurance Policy protects the Board Members, Officers, and other executives of a company from claims of Wrongful Acts committed in their managerial capacity.
A Wrongful Act in a D&O Policy can be a Breach of Duty, Neglect, Error or Omission, Misstatement, or Misleading Statement. The D&O Liability Insurance Policy provides cover for Defence Costs and Compensatory Damages.
Directors and Officers of a Company operate in an uncertain and challenging environment, and they are exposed to litigation from various quarters such as shareholders, regulators, customers, employees, competitors, creditors etc. In recent years, there has been an increase in the number of lawsuits against directors and officers and hence a D&O Insurance Policy is a must-have policy for companies to protect the directors and officers.
This article will discuss the benefits of a Directors and Officers Liability Insurance Policy in detail.
5 Benefits of a Directors and Officers Liability Insurance Policy
Protect Personal Assets of Directors and Officers
There are certain instances where the company is not able to indemnify the Directors and Officers against claims of Wrongful Acts such as when the company is insolvent and does not have funds or when criminal proceedings are initiated against the Directors and Officers. In such cases, the Directors and Officers of a Company may be personally liable for the legal expenses and settlements and their personal assets might also be at risk.
Side A Cover in a D&O Liability Insurance Policy provides coverage to Directors and Officers in cases where the company is unable to or refuses to indemnify the Directors and Officers and thus Side A Coverage in a Directors and Officers Liability Insurance Policy is extremely important to protect the personal assets of directors and officers.
Financial Stability for the Company
Side B Cover in a D&O Liability Insurance Policy provides reimbursement for the Defence Costs and Settlements paid by the company to defend its directors and officers against claims of alleged wrongful acts. Many times, the Defence Costs and Judgement awards in defending the directors and officers of the company run into crores of rupees and can be a serious financial setback in case the company is uninsured.
A D&O Insurance Policy mitigates these risks by reimbursing the company for Defense Costs and Damages paid by the company on behalf of its directors and officers. A D&O Liability Insurance Policy thus provides financial stability to the company by covering such claims.
Attract and retain top talent
A Comprehensive Directors and Officers Insurance Policy definitely acts as an added incentive when potential directors and officers are considering joining the Board of Directors. This is because a D&O Insurance Policy provides a safety net by covering lawsuits brought against the directors and officers. This is often a significant factor for directors and officers which influences their decision whether to accept or reject a position within a company. In fact, many directors ask for the company’s D&O Coverage before agreeing to join the board.
Obtain Funding
Many Venture Capital and Private Equity Companies mandate that a company has comprehensive D&O Insurance Coverage before agreeing to fund the company. A well-constructed D&O Policy thus makes it easier for companies to avail funding as well.
Protection against Employee Practices Liability Claims
A D&O Liability Insurance Policy also has an option of providing coverage from employment practices liability claims apart from claims alleging wrongful acts. Employment Practices Liability Claims constitute claims alleging Discrimination, Sexual Harassment, Wrongful Termination etc. D&O Policy Coverage includes cover for Employment Practices Liability Claims as well.
Conclusion
In today’s time of increasing litigations, there are many benefits of purchasing a D&O Liability Insurance Policy. It provides protection to personal assets of directors and officers while also acting as an incentive to attract talented employees.
Qian is a licensed D&O Insurance Broker in India and companies looking to purchase a D&O Liability Insurance Policy can approach Qian. We have experience of serving clients across diverse industries and can assist companies in availing a comprehensive D&O Policy Coverage with minimal exclusions in a D&O Policy. We assure you of a competitive cost of a D&O Liability Insurance Policy.
You can email us at insurance@qian.co.in. We would be glad to assist you.
- Directors and Officers Liability Insurance
- A must have for your organisation
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- What is Side A Cover under a Directors and Officers Liability Insurance Policy?
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