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Directors and Officers (D&O)

What is it?

Directors and Officers (D&O) insurance is a specialized liability coverage designed to protect the personal assets of directors and officers of a business, as well as the company itself, from potential financial losses arising from legal actions or claims brought against them in their capacity as decision-makers. D&O coverage is also important for not for profit corporations and community organizations. 


Small and mid-size businesses are likely to demand D&O insurance coverage as they engage in more partnership and long-term agreements. Insurance for directors and officers is important for these companies, since it helps them to sustain in the market. In addition, to keep their brand loyalty and secured financial data, D&O insurance is also essential for businesses. Consequently, the increase in the number of small & midsize businesses and adoption of D&O insurance is expected to foster the market growth.


Why D&O Insurance is Important?

1. Personal Liability: Directors and officers can be held personally liable for their management decisions, potentially exposing their personal assets to risk.

2. Legal Costs: D&O insurance covers the defence costs, settlements, and judgments associated with claims against directors and officers.

3. Talent Attraction and Retention: Offering D&O insurance can help attract and retain high-quality directors and officers, as it provides them with financial protection.

4. Company Reputation: A D&O policy demonstrates a company’s commitment to responsible corporate governance and can help maintain investor confidence.

 

Key Coverage 

•Protects individual directors and officers when the company is unable or unwilling to indemnify them.

•Reimburses the company for indemnification payments made to directors and officers.

•Provides coverage for the company itself in the event of securities claims.

 

Common Claims:

1. Breach of fiduciary duty: Directors and officers have a responsibility to act in the best interests of the company and its stakeholders.

2. Misrepresentation: Inaccurate or misleading statements made by directors and officers can lead to legal action.

3. Employment practices: Directors and officers can be held responsible for claims arising from wrongful termination, harassment, discrimination, and other employment-related issues.

4. Regulatory investigations: Directors and officers may face regulatory scrutiny and potential penalties for non-compliance with applicable laws and regulations.