Insurance covers a variety of industries, along with their liabilities and assets. One area that many business owners fail to consider is the insurance that protects the directors and officers and in my opinion is one that cannot afford to be missed.
What is it?
Directors and officers liability insurance is primarily taken out to protect the personal assets of directors and officers, providing indemnity in a number of areas.
Commonly, these are losses arising from a claim or as a result of a wrongful act committed in the course of their duties. The issue here, and why a policy is a necessity, is that a wrongful act can be broadly defined as an error, misleading statement, conduct, omission, neglect or even breach of duty.
What defines a director or an officer?
Directors and officers are people directly involved with the management and running of an organisation. A policy should ensure that the individual person is covered, not the company.
Usually, directors and their direct subordinates such as secretaries are covered, along with executive officers, employees and natural persons as deemed by legislation.
What does the policy usually cover?
Once an understanding has been garnered of exactly who is to be covered within the business, it’s important to understand what a falls under the umbrella of a policy.
Within any directors and officers insurance product, it’s important that judgements, settlements and defence costs are included, along with any investigative costs and costs to appear at inquiries or investigations.
While this type of policy may be needed infrequently, knowing that it’s in place can be relieving for many directors and officers.