D&O Insurance -Covers your director's liability costs
What is Directors and Officers Insurance? • Directors and officers (D&O) insurance is a type of professional liability insurance. • D&O insurance protects directors, officers, and board members of a company against lawsuits and liabilities. • It started as personal financial protection insurance in the 1930s. • However, this insurance does not protect the organization itself, but rather the directors and officers.
What does D&O Insurance cover? • Misuse of company funds • Misuse of assets • Fraud allegations • Intellectual property theft • Breach of workplace laws
When do you need D&O Insurance? Particularly, this insurance is necessary for you if: • You are looking for venture capital. Usually, investors will ask for D&O coverage as a form of protection for themselves. • You want to retain or attract the best executives and directors. In this case, it will act as an incentive for people unwilling to put their personal assets at risk.
Common endorsements to D&O Insurance • Retired directors and officers endorsement : This endorsement extends coverage to retired board members for lawsuits. • Advancement of defence endorsement : This endorsement obliges the insurer to pay defence costs to the insured .
Common exclusions from D&O Insurance • Prior or pending litigation exclusion: As a rule, a prior or pending litigation exclusion will remove coverage for claims of damages for lawsuits that are already in place when the policy is obtained. • Fraud exclusions : D&O insurance will deny coverage for acts of intentional fraud and profiteering. You can endorse coverage for this. • Major shareholder exclusions: D&O coverage is usually denied against lawsuits that arise from claimants with a significant percentage of the company (usually 10-15%).
Factors that Determine the Cost of D&O Insurance • Ownership model • Type of business and experience • International exposures • History of claims