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

Directors & Officers Liability insurance is relevant to your organisation if it is incorporated or run by a committee or board.  It is also referred to as Management Liability or Trustees Indemnity insurance, depending on sector-specific products.  This type of cover can be extended to include Slander, Fidelity, Employee Crime, Corporate Legal Liability and Employment Practices Liability cover.

This type of cover provides you with 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. This covers quite a broad range of scenarios, especially as claims can come from within an organisation or from a third party.

In terms of how the cover operates, you should be aware of the following:

  • Basis of cover – Directors & Officer Liability can provide a limit of indemnity either in the aggregate or an any one claim basis. An aggregate limit is the most that an insurer will pay in any given policy period (usually a year). If the policy is set up on an “any one claim” basis the limit of indemnity will apply to each claim, irrespective of how many claims there are in the policy period.
  • Claims Made – Directors & Officers Liability policies are usually on a “claims made” basis. This means that cover is provided for claims brought against the insured during the policy period. By contrast, Public Liability policies are usually on a “claims occurring” basis where the insurer at the time the loss/incident occurred will deal with the claim, irrespective of when the claim is brought.
  • Prior & Pending Litigation Date – Directors & Officers Liability policies usually preclude coverage for claims from litigation that was pending prior to the inception of the policy

As your broker we need fairly limited information to set up a Directors & Officers Liability policy. We need to know which entity or entities are to be covered, where they are located along with previous years’ income and total assets. We also need to know about any redundancies, employment disputes and previous claims. If there are numerous legal entities within your corporate structure we will need to understand the relationships and ownership.

Do you buy Directors & Officers Liabilty insurance at the moment? If this blog has raised any questions, and you’d like our help to answer them, do get in touch with us.  Likewise, drop us a line if you are thinking of putting this kind of insurance in place, we specialise in helping organisations arrange commercial and charity insurance policies.  Finally, for more information about how to buy insurance you can download our buyers’ guide.