Directors & Officers (D&O) Liability Insurance Explained

Directors & Officers Liability insurance is probably one of the least well understood types of insurance available to organisations.

It is relevant to your organisation if it is incorporated or run by a committee or board. Depending on sector-specific products, it may also be referred to as Management Liability or Trustees Indemnity insurance. This type of cover can often be extended to include:

• Slander

• Fidelity

• Employee Crime

• Corporate Legal Liability

• Employment Practices Liability

This insurance provides a promise to cover the costs of any claim brought by anyone against your organisation for financial loss as a result of a wrongful act committed by a director, board member, or senior employee. Claims can come from inside your organisation or from a third party.

Key Features of Directors & Officers Liability Insurance

Basis of Cover

• Aggregate Limit: The most an insurer will pay in any given policy period (usually a year).

• Any One Claim Basis: The limit of indemnity applies to each claim individually, irrespective of how many claims arise during the policy period.

Claims Made

D&O policies are usually claims made, meaning cover applies to claims brought during the policy period.
By contrast, Public Liability policies are usually claims occurring, where the insurer at the time of the loss/incident handles the claim, no matter when it is brought.

Prior & Pending Litigation

Policies usually exclude coverage for claims from litigation that was pending prior to the inception of the policy.

Setting Up Your Policy

As your broker, we require fairly limited information to arrange a Directors & Officers Liability policy, including:

• Which entity or entities are to be covered

• Where the entities are located

• Previous years’ income and total assets

• Any redundancies, employment disputes, or previous claims

If your organisation has multiple legal entities, we’ll also need to understand the relationships and ownership structure.

Need Help or Have Questions?

Do you currently hold Directors & Officers Liability insurance? Or are you thinking of putting this kind of cover in place?

If this blog has raised any questions, or you would like our help, do get in touch with us here.

We specialise in helping organisations arrange commercial (link) and charity (link) insurance policies.