Management liability insurance is often called directors’ and officers’ (D&O) insurance.
It protects senior members of your team against claims of mismanagement and other alleged wrongful acts while performing their duties and running the business.
Directors and officers have legal responsibilities to employees, the public, regulators, investors, and other stakeholders, so should consider liability insurance to protect themselves from claims due to their professional actions or omissions.
What D&O insurance covers
Cover is typically provided for:
Legal defence costs. Defending against claims, which can be costly even if the claim is dismissed. Damages and settlements. Payments owed by directors and officers as a result of losing a claim. Wrongful acts. protection Against claims for breach of duty, breach of trust, negligence, and other alleged wrongful acts. Regulatory investigations. Cover for expenses associated with investigations by regulators.A basic D&O insurance policy covers two sides:
Side A cover. Claims made against the directors and officers (the insured). It covers the defence costs and damages incurred by an individual if the company doesn’t defend the insured person. Side B cover. Covers the company’s costs if it is legally obliged or permitted to defend the insured person against a personal claim.Non-standard cover
See the full picture
D&O insurance is an important part of a comprehensive insurance programme. While existing insurance polices may have elements of management liability cover, they are often not enough to protect directors and officers – and the business. Elmore can review your risks and undertake a gap analysis.
Management liability (D&O) insurance FAQs
Who needs D&O insurance?
Any business with a board of directors and a senior management team should consider D&O insurance. This includes public companies, private companies, non-profit companies, and charities. D&O insurance is often an essential requirement for companies seeking external funding, as investors will expect this type of insurance to be in place.
What does D&O insurance NOT cover?
D&O insurance generally does not cover:
- Intentional fraud or criminal acts
- Bodily injury or property damage
- Personal profit or illegal gains
- Claims known before policy inception
How much D&O coverage will I need?
Coverage will depend on criteria such as your company size, industry, number of directors, risk profile, and whether the company is listed. Elmore can review your risks and determine appropriate limits.
Is D&O insurance a legal requirement?
No. However, many investors and lenders make it a condition for investing.
Is D&O insurance the same as general liability insurance?
No. General liability covers bodily injury and property damage whereas D&O insurance covers financial losses arising from mismanagement and alleged wrongful acts by directors or officers.
How do I minimise D&O risk?
- Maintain strong and transparent governance and reporting
- Ensure regulatory compliance
- Keep up-to-date and accurate financial records and reports
- Review your D&O coverage and risks