Actions against directors and professionals can seriously damage a company and irreparably damage an individual’s own career. Even unfounded allegations can be extremely stressful, expensive and time consuming to defend.
The Directors’ and Officers’ liability insurance policy (or D&O policy) protects both the insured company, and its directors and officers. The company’s shareholders, employees, customers and creditors are among the possible third party claimants.
D&O insurance covers liability of a company’s directors and officers and, normally, that of the company as well, to pay damages in respect of “wrongful acts”, which may be defined in the policy to include:
Some D&O policies extend cover, so that the term “insured” to include all employees of the company for the purposes of claims relating to:
The policy also covers legal expenses, of both the insured in defending or resisting third party claims and the successful third party.
The policy is usually subject to an aggregate limit of liability applicable to all claims made within the insurance period, which limit is either inclusive or exclusive of the insured legal expenses.
Typically you will find there will be certain caps to the coverage extensions, for example:
- Civil/ Bail Bond expenses: 10% of the limit of liability;
- Excess Limit for Non Executive Directors: USD250K per director USD 1M in the aggregate;
- Mitigation Costs (PI) : 20% of the limit of liability
- Extradition Costs - 10% of the limit of liability;
- Prosecution costs - 10% of the limit of liability
- Representative and Investigation Costs - 10% of Limit of Liability
- Loss of Documents - 10% of the limit of liability;
You will also find that some policies will provide an option to cover where there has been a crime committed, such things as:
- Mitigation Costs
- Business Interruption
- Data Reconstitution costs
- Identity theft
D&O insurance is written on a claims-made basis. Therefore individual directors will need to consider how cover can be maintained for them after they leave the company. Besides, consideration will have to be given to the extent to which cover should be maintained if a company ceases trading or is dissolved or taken over.
Some insurers automatically grant retroactive cover for the period for which D&O insurance has been held, excluding claims and circumstances notified under previous insurance policies, prior or pending litigation, and matters involving substantially the same facts as such prior or pending litigation.
D&O Cover for Private Equity firms
In order to obtain a quote for D&O cover, we will need you to provide:
- A fully completed signed dated proposal
- A full list of portfolio companies/ investments in the pipeline;
- Percentage breakdown of investors by
- Institution investors vs. retail investors/ high net worth individuals; and
- Investors in North America vs. those in the rest of the world
- Confirmation on where did the funds registered originate and by whom these funds/ investment managers are regulated?
- Estimated percentage of revenue to be generated from your operations in various countries (There may for example, be some jurisdiction issues in Singapore, due to the Monetary Authorities local insurer requirements).
- CV's of the key staff
Allied World details
Navigator Insurance Brokers Ltd
Unit E, 8/F Golden Sun Centre
No. 59-67 Bonham Strand West
Sheung Wan, Hong Kong