Discover the personal liability exposures of directors and officers, and the insurance policies designed to protect them.
Duty, liability, and indemnification
The directors and officers of an organisation have a broad range of duties. If things don’t go to plan, they can be held responsible for their actions.
Directors duties
An organisation’s management is required to satisfy a range of directors duties in the performance of their role.
Board of directors liability
Management may be exposed to board of directors liability if they fail to perform their duties as expected.
Directors indemnification agreement
A directors indemnification agreement is the first line of defence for protecting management from personal liability.
Types of insurance coverage
Insurance is an effective way of transferring risk away from an organisation and its management, and onto an insurer. It is available in a variety of formats.
Directors and officers liability insurance
Directors and officers liability insurance protects an organisation and its management from managerial-related claims.
Employment practices liability insurance
Employment practices liability insurance protects an organisation and its management from employment-related claims.
Management liability insurance
Management liability insurance protects a small and medium enterprise and its management from a broad range of losses.
D&O insurance for nonprofits
D&O insurance for nonprofits is an important consideration for community-focused organisations and charities.
Side A coverage
Side A coverage is an important consideration for individuals in the event that they are not indemnified by an organisation.
Side C coverage
Side C coverage is an important consideration for public companies who are at risk of securities-related claims.
Typical policy attributes
There are a range of concepts that apply to insurance policies designed for management. Many of these concepts are unique, and not often shared by other policy classes.
Claims made policy
A claims made policy requires that a claim be first made against and insured and notified to an insurer within a policy period.
Prior acts coverage
Prior acts coverage describes a policy’s ability to cover acts that occurred prior to the commencement of a policy period.
Retroactive date
A retroactive date, also known as a prior acts date, can be used to restrict the prior acts coverage of a policy.
Pending and prior litigation date
A pending and prior litigation date aims to eliminate coverage for claims that have commenced prior to a specified date.
Components of a policy wording
A policy’s insuring clauses will outline its core coverages, and will work together with other aspects of a wording to formulate its overall protection.
Wrongful act
A wrongful act describes the behaviour of an insured that a claimant believes has caused them financial loss or injury.
Extensions
Extensions broaden a policy’s coverage and provides an insured with additional protection.
Exclusions
Exclusions aim to eliminate an insurer’s exposure to undesirable risks faced by an insured.
Conditions
Conditions outline the various subjectivities that attach to a policy’s operation and coverage.
Considerations for risk retention and transfer
When an organisation purchases insurance, it must decide on how much risk it should transfer to an insurer, and how much it should retain for itself.
Limit of liability
A limit of liability is the maximum amount that an insurer is liable to an insured for covered claims in a policy period.
Self-insured retention
A self-insured retention is the amount of loss that an insured must incur for a covered claim before a policy will respond.
Arranging coverage for an organisation
The are a range of processes involved in establishing insurance coverage, and making midterm alterations as required.
Application process
An application process is undertaken by an organisation to establish a new policy and replace an expiring one.
Duty of disclosure
An organisation and its management are required to satisfy a duty of disclosure to secure coverage from an insurer.
Underwriting process
An underwriting process is undertaken by an insurer to assess the risk of an insured, and set the terms and pricing of coverage.
No known loss letter
A no known loss letter is used by an organisation to declare that it is not aware of any undisclosed claims and circumstances.
There are a range of situations where changes to an organisation’s ownership or corporate structure can have a material effect on its insurance coverage.
Change in control
If an organisation is subject to a change in control during a policy period it will result in a conversion of coverage.
Run off insurance
Run off insurance often describes the practice of purchasing coverage to protect an organisation’s long-tail exposure.
Extended reporting period
An extended reporting period may be available to an organisation following a change in its corporate structure.
Discovery period
A discovery period may be available to an organisation in the event that it does not, or cannot, replace a policy.
Claims handling
Insurance is often purchased with the hope that it will never be required. Realistically, however, it may only be a matter of time before claims need to be considered.
Claim notification process
The claim notification process describes how an insured will need to notify an insurer of any claim or circumstance.
Duty to defend
The duty to defend an underlying claim may be the responsibility of an insured or insurer, depending on a policy’s structure.
Claim settlement process
The claim settlement process describes how an insured may seek to resolve a claim and recover any loss from an insurer.
Claim examples
Claim examples are useful for understanding some of the risks faced by an organisation and its management.
The evolution of coverage
It can be helpful to understand the broader context of why things are the way they are, and how things came to be.
D&O history
The history of directors and officers liability insurance provides insights into the evolving nature of managerial risk.
