Directors and Officers Insurance (D&O)

Directors and Officers insurance is a policy aimed at protecting the personal wealth advisors, corporate managers, general directors, managing directors or other equivalent posts.

Although a company is taking out the policy, it covers the managers and directors against claims by third parties (regulatory bodies, creditors, competitors) including claims from the company in question (employees, shareholders) arising from their managerial decisions.

It is a valid policy for small businesses or large organizations. A family SME can also receive claims for reasons such as inheritance or harassment.

Claims against spouses, advisors, retired directors, subsidiary and affiliated companies are also included.

Most important types of Directors and Officers insurance (D&O) coverages

The Directors and Officers insurance

covers losses that directors or managers have to pay for claims or formal investigations for damages to third parties arising from carrying out their tasks.

This coverage protects high level managers

from having to pay with their personal wealth and provides peace of mind for them to carry out their managerial roles in the company. For this reason it is more and more common that directors and managers require its provision in their contracts before taking up the post.

It covers legal costs

for the defence in advance and possible indemnities that might be faced, always when no willful intent has been demonstrated. Also advertising costs are covered.

It also covers claims for labour matters

that arise from an action or omission carried out by any employee of the company.

What events can activate the Directors and Officers (D&O) policy?

  • A bank sues the general directors of a company for not communicating relevant information at the time of closing a financial deal. The bank accuses the general director of providing misleading information.
  • The management of a company decide to expand the factory to increase production capacity. Due to a lack of diligence the costs of the expansion double the initial quote presented to the shareholders, who claim for damages caused by the negligence.
  • After a bankruptcy the judge rules that the administrators are guilty and they must respond with their personal wealth for debts not covered by the company capital.

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