This policy provides coverage for claims brought against directors and officers of a company for actual or alleged breach of duty, neglect, misstatements, errors, or omissions. The coverage includes the advancement of defence costs granted prior to the final disposition of a claim for individuals when the corporation cannot provide such costs. It also covers reimbursement for indemnification of directors and officers for any judgments, settlements, and defence costs associated with covered claims when the company has indemnified the insured for loss.

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The Directors' Liability Insurance policy provides for the payment of claims on behalf of the insured "directors and directors" filed against them as a result of an act or wrongdoing (misrepresentation, omission, negligence - defamation) in the course of performing their duties as directors, and also includes coverage of legal defense costs.

What is Directors' Liability Insurance and Employee Liability (D&O) Insurance?

Directors' and Officers' Liability (D&O) insurance is an insurance coverage intended to protect individuals from personal loss if they are prosecuted for professional errors or negligence while working as a director or officer in a company or other type of organization.

This policy can also cover legal fees and other costs that may be incurred by the organization as a result of such a lawsuit, as the Managers and Officers Liability Insurance – also known as D&O Insurance – covers the cost of compensation claims filed against your business managers and principals for wrongful acts.

Such include:

  • Dishonesty.

  • Breach of professional duty.

  • Negligence.

  • Professional errors.

  • Misleading statements.

  • False defamation.

Key points of the Directors and Employees Liability Insurance Policy

  • Directors' and Officers (D&O) liability insurance covers directors and officers, their companies or organizations if they are prosecuted for negligence and professional errors (most policies exclude fraud and criminal offenses).

  • D&O insurance claims are paid to cover losses associated with litigation, including legal defense fees.

  • Type I side cover covers directors and officers for claims where the company refuses or is financially unable to pay compensation.

  • Type II side cover also covers losses of directors and officers when the company is awarded compensation.

  • Side coverage includes the third type – also called "entity coverage" – coverage for the corporate entity itself.

Who needs a Managers and Employees Liability Insurance Model?

If a person owns a company or organization and has directors or key employees, the liability insurance of directors and officers can cover the cost of compensation claims filed against them by shareholders, investors, employees, regulators or third parties.

Directors and officers have specific duties, responsibilities and powers relating to their positions. They are usually specified in the job description or terms of reference, and if a director or employee of your company is found to have acted outside their jurisdiction, civil, criminal or regulatory proceedings can be brought against them.

Liability insurance for directors and officers covers the cost of defending these proceedings, as well as any indemnity costs arising from an unsuccessful defense.

How much is the liability insurance coverage for directors and officers?

The Liability of Directors and Officers model covers claims filed by:

  • Regulators, shareholders or investors, e.g. for not acting in the interest of the company

  • The Liability Insurance Form for Directors and Officers sometimes covers defense costs arising from criminal and organizational investigations in the company where no wrongful act has been alleged against one of the directors.

What are the exclusions not covered by directors and employee liability insurance?

Liability insurance for directors and officers does not cover claims against the organization as a whole, only those brought against individuals for alleged wrongful acts carried out in their capacity as directors or employees.