As a result of the volatile global economic landscape, corporate executives and boards of directors are under greater scrutiny from their stakeholders than ever. Difficult decisions have to be made, and unfavourable actions taken. Under such circumstances, it’s important that these top-level managers are protected financially.
A Directors and Officers policy can extend to cover trials and defence costs arising out of criminal and regulatory investigations. Intentional illegal acts, however, typically won’t be covered under a Directors and Officers Insurance policy.
What is Directors And Officers Insurance?
Directors and Officers Insurance (often called D&O) offers liability cover for company managers. It is designed to protect them from claims that may arise from the decisions and actions that they take within the scope of their regular duties.
Directors And Officers Insurance can help directors, managers and other executives survive the unexpected, with minimum losses.
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The Importance of Directors and Officers Insurance
Managers can make mistakes, and are often personally legally liable for them. Top level managers constantly walk the line of making tough and complex decisions that have a huge impact on the whole business – often with limited information available.
Furthermore, an increasing number of companies are operating in a multinational environment with investors, trading partners or suppliers located in various jurisdictions all over the world. This means that Directors and Officers have to keep in mind compliance regulations for different government bodies and the latest best practices for corporate governance and risk management in numerous locations.
This increased complexity in the operating environment puts managers in the firing line. Directors and Officers Insurance can protect them.
What Risks May a Directors and Officers Policy Cover?
Directors and Officers Insurance covers the decisions made by people involved in managing and running an organisation. Originally, Directors and Officers Insurance only covered the individuals’ liability, but now there is also the option to include cover for claims brought against the company.
There is a range of circumstances that a Directors and Officers policy may cover. Examples include:
- A manager is dating an employee and decides to promote that employee. Even if the employee in question was the best fit for the role, this can be seen as a conflict of interest, and another employee may take legal action as a result. Depending on the circumstances, Directors and Officers Insurance may cover legal fees.
- Unbeknown to the CEO, a CFO misrepresents income and expense figures on the company’s financial statements to influence current financial results. The CEO may be covered for legal defence costs under a Directors and Officers policy.
- A busy CFO signs a financial report without properly examining it. There is a mistake on the report, which results in legal action being taken out against the company. Directors and Officers Insurance may protect the CFO and the wider business against costs incurred as a result.
As a business owner, the continuing success of your company is dependant upon your ability to manage, mitigate and transfer risks. Risks like these are extremely difficult to predict, so it is imperative to back up any risk prevention strategies with a comprehensive insurance policy that can fully protect your business, your assets and your employees.
What Are the Key Things That May Be Covered By a Directors and Officers Policy?
Cover differs from policy to policy, but there are certain features that are commonly included in a Directors and Officers Insurance policy. Directors and Officers Insurance typically covers the cost of compensation claims made against your business’s directors and key managers for alleged wrongful acts such as:
- Breach of trust
- Breach of duty
- Error or omission of information
- Misleading statements
- Wrongful trading
- Employment practices & HR issues
- Shareholder actions
- Failure to comply with regulations or laws
- Decisions exceeding the authority granted to a company officer
Who Needs Directors And Officers Insurance?
Directors and Officers cover has become a necessary part of the risk management strategy of many large companies. However it also essential for many other organisations.
Major publicly listed companies have the highest risk of attracting Directors and Officers claims, but any business entity is open to D&O exposure. Claims brought against Directors and Officers come in many forms, from different sources, such as:
- Shareholders: accusing of neglect or misleading statements
- Employees: claiming wrongful dismissal or harassment
- Statutory bodies: alleged breaches of fiduciary obligations
- Competitors: allegations of conduct involving anti-competitive behaviour
How PSC Direct works for you
As specialist small business insurance brokers, PSC Direct uses our considerable experience to provide multiple quotes for you. Combining our expertise insuring thousands of other similar businesses with our detailed database of insurers and insurance products; we’re best placed to advise you on the right insurance for your business.
We have strong relationships with the leading underwriting agencies and insurance companies. We can source the most appropriate business insurance policy for you, covering you for what you really need, at the right price.
We can help sole practitioners, small, medium and large businesses protect the businesses you are growing and ensure your assets are covered in the event that disaster strikes.
With our strong relationships to a broad range of highly-rated insurers we are able to advise you on business insurance, professional indemnity insurance, and professional indemnity insurance specifically tailored to meet the risk exposure of your business.
We can also provide advice on a range of additional insurance policies and cover that can affect your business and make sure you have the right insurance at the right price.
72% of Australian businesses fail after experiencing a major loss.
The right business insurance will ensure you are not one of them.
While good insurance covers you for most things – Professional Indemnity, Professional Liability and Property, great insurance covers you for the specific risks that your business faces. We understand that every business is unique and you need a policy that addresses the specifics. We make sure that when you have a claim that’s out of the ordinary and complicated, you’re covered.