Director and Officer liability insurance is no more a luxury policy and it has become a mandatory policy in today’s world.

We have collected a few claim examples which this policy covers and pays for the same.

The policy is available at throw away prices and beacon has got expertise to stitch the policy to tailor your requirements.

Some claim examples & illustrations on covers under Directors & Officers Policy:

1) Shareholders claim against Director –

The insured company was involved in some manufacturing business. The company sold a significant portion of its product to a single customer who failed to pay for the goods supplied over a period of five months. The finance director of the company took decision to pursue claim of debt recovery and company incurred substantial legal fees and related expenses.  He should have known that legal fees and exposes are going beyond company’s resources. As a result, the bills from the lawyers who were engaged to pursue the debts went unpaid and they sued for their fees. Finally, the company went into liquidation.

A successful claim was made by shareholders against the concerned director. The claim was indemnified under the D&O policy because it was established that there was no dishonesty involved.

2) Corporate Tax Liability cover –

In above claim, let presume corporate tax of company is also due. Since company is in liquidation, it may be possible that assets of company are not sufficient to pay corporate taxes and subsequently, company may become insolvent. In such situation, same liability would come on each director as directors are jointly and severally liable for their acts. Thus, Directors would be made personally liable and your Directors & Officers policy would pay such unpaid corporate taxes. However, liability arising from the willful intent of Director to breach any statutory duty governing the payment of taxes is not covered by Directors & Officers Policy

3) Employment Practices claim against Director –

One of the female employees of the Insured Company complained to executive director that her manager had sexually harassing her. Executive director assured he will look into it and never did due to busy schedule. After written complained, no action taken and later employee quit the job. And brought claim against Executive director for not allowing sexual harassment in the workplace.  Following this executive director looked into the matter and found manger responsible for the same. Manager was also fired. This again resulted in one more claim against Executive Director from the manager, who was fired Manager sued for wrongful termination, alleging that his unacceptable behaviour had been tolerated for many years and that he had received no warning that others had found it inappropriate.

In both cases, D&O Insurance could have covered the associated legal expenses and settlements.

4) Regulatory claim against Director –

In this case, Directors of the company were made party along with the Insured Company. The insured directors of a company involved in logging operations were prosecuted under the Resource Management Act following the release of sediment into a nearby stream. The prosecution involved allegations or ‘wrongful acts’ by the directors.

The Directors & Officers Liability policy responded to successfully defend the directors although the company as an entity was convicted and fined.

5) Non-Executive Director –

The principal shareholder and director of a small retail company died and the shareholding was left to his widow. The widow’s son took over the management of the company whilst the widow continued to be the sole shareholder and director of the company but with no active day to day involvement. The company became insolvent and went into liquidation. A supplier brought an action against the widow, as the sole director, for the amount owed of $165,000.

The Court found that it was no defense that the widow did not know about the company’s affairs and made her personally liable for the debts. The claim was indemnified by the company’s D&O insurance.

6) Pollution Defense costs cover –

A manufacturing company was discharging treated effluent in outside the factory premises. One social activist found that few animals died after consumption of treated effluent. And, claim was filed before court of law against company wherein Managing Directors of the company was named as party to claim. An allegation was that effluent is not treated properly to make free from danger. In such situation Directors and officer’s insurance policy will protect Managing Director by providing defence costs for his negligence act of overlooking safety standards of treated effluents.

7) Public Relation Expenses & Counseling expenses –

One female employee has filed claim against Director for rape before court of law. Court has heard both the parties and found that allegations were baseless. And, the court has dismissed the claim against director but whole process took almost one year. During this time media has reported him as rapist and thus, his reputation was maligned and director himself also psychologically disturbed.

In this situation, Directors and officers policy will protect Director and pay defense costs in addition to expenses incurred in hiring Public Relation consultant to reinstate his reputation. Also, psychological support expenses of hiring some psychologist/ counsel would be paid by Directors and Officers policy.

8) Corporate Manslaughter & Occupational Health and Safety Hazards defence cost cover –

In a manufacturing company, fatal accident took place in one of their plant in which around 10-15 people died and many got injured. Police and Health & Safety executive investigated the site and charges of manslaughter and health & breach were made against company and its directors. In such situation only defense costs incurred by Directors would be paid by Directors and Officers provided Directors are not found guilty.

Disclaimer: Please note above claim examples and illustrations are developed after R&D done by Beacon Insurance Brokers Pvt Ltd for better understanding of coverage’s under above mentioned insurance.  Broker accepts no liability for any loss arising directly or indirectly for any error or omission in this document.

-Warm Regards

Beacon Insurance Brokers Pvt Ltd