Directors and Officers Liability (D&O)
Protect your directors and officers with D&O Insurance
Directors’ and Officers’ Liability Insurance (D&O) covers the personal liability of directors and board members and protects them against claims from third parties.
Coverage for directors and board members
Commercial Institution Directors and Officers (DO) liability insurance provides coverage for the personal liability of directors and officers of a company, protecting them against claims made by third parties for alleged wrongful acts in their capacity as directors and officers.
D&O Insurance can provide several types of cover for both directors and the company:
Coverage for Individual Directors and Officers (Side A)
- Personal Liability Protection: Protects directors and officers from personal losses due to lawsuits filed against them for wrongful acts committed in their official capacities.
- Defense Costs: Covers legal fees, settlements, and judgments arising from these claims.
Corporate Reimbursement (Side B)
- Indemnification: Reimburses the company when it indemnifies its directors and officers for claims made against them. This means if the company has covered the legal costs or settlements on behalf of its directors and officers, the DO policy will pay the company back.
Entity Coverage (Side C)
- Direct Coverage for the Organization: Protects the company itself against securities claims. This is particularly relevant for publicly traded companies where the entity itself can be sued by shareholders.
What does D&O Insurance cover?
Here are some examples of the types of claims typically covered by a DO liability insurance:
Breach of Fiduciary Duty:
- Claims alleging that directors or officers failed to act in the best interest of the company and its shareholders.
Mismanagement:
- Allegations of poor management decisions that result in financial loss.
Misrepresentation:
- Claims involving false or misleading statements made by directors or officers.
Regulatory Investigations:
- Coverage for costs associated with regulatory investigations into the actions of the company’s directors and officers.
Employment Practices Liability:
- Claims related to employment practices, such as wrongful termination, discrimination, and harassment, are sometimes included, depending on the policy.
Here are some examples of the types of claims typically not covered by a D&O liability insurance:
Intentional Illegal Acts:
- Claims arising from fraudulent or criminal activities are typically excluded.
Personal Profit:
- Claims where directors or officers gained a personal profit to which they were not legally entitled.
Bodily Injury and Property Damage:
- Generally, D&O policies do not cover claims related to bodily injury or property damage, as these are typically covered under other types of insurance.
Additional circumstances:
Defense Costs Outside the Limit:
- Some policies may offer defense costs outside the policy limits, meaning legal defense costs do not erode the limit of liability available to pay settlements or judgments.
Extended Reporting Periods:
- Options for extended reporting periods (tail coverage) which allow claims to be reported after the policy has expired, provided the wrongful acts occurred during the policy period.
Worldwide Coverage:
- Coverage often applies on a worldwide basis, providing protection for claims made in different jurisdictions.
Claims-Made and Reported:
- D&O policies are typically written on a claims-made basis, meaning they cover claims made during the policy period and reported within a specified time frame.
Frequently asked questions about D&O Insurance
What are the financial liabilities of a board member?
As a board member, you are responsible for overseeing the company’s financial affairs. This includes monitoring the company’s financial performance and ensuring that it maintains an adequate capital base, sufficient liquidity, and appropriate procedures for risk management and internal controls.
Can a board member be held liable for breaches of law by the company?
As a board member, you are required to fulfil the duties and responsibilities associated with your role. If you act negligently or fail to fulfil your duties, you may, in certain circumstances, be held personally liable in connection with the company’s breach of applicable laws and regulations.
Special rules may apply depending on the ownership structure of the business and the types of employees it engages.
When can a director or board member be held liable?
As a director or board member, you may be held personally liable for decisions, actions or omissions made in the course of your duties. Liability may arise if, through intentional or negligent conduct, you cause a loss to the company, its owners or a third party. Whether personal liability arises will always depend on the specific circumstances.
Is D&O Insurance required by law in Denmark?
No, D&O Insurance is generally not required by law in Denmark. However, directors and board members may be held personally liable for actions or omissions in connection with their duties. D&O Insurance can therefore be relevant in protecting directors and board members against the financial consequences of such claims.
How do you report a claim under D&O Insurance?
If a claim arises, or circumstances occur that may give rise to a claim under the D&O Insurance policy, it should be reported as soon as possible. For more information about the process, visit Report a Claim.
Do you have questions about our D&O Insurance?
If you have questions about our D&O Insurance or need help finding the right solution for your company, our experts are ready to assist.
