There is a common misconception that directors and officers insurance covers everything, exclusions in the fine print however could be your undoing….. for example:
Directors and Officers insurance Exclusions
The term ‘exclusions’ refers to those acts or losses that are not covered by the D&O insurance policy.
Typically, a D&O insurance policy will specifically exclude:
- Cover for an act, omission or dispute which occurs prior to the policy period which the director knew or ought reasonably to know was likely to give rise to a claim.
- Any deliberate act of fraud or dishonesty.
- Any failure to take all reasonable precautionary measures to avoid or lessen the chance of any claim being made.
- Failure to co-operate with a legal representative appointed by the insurer to defend a claim.
- Environmental or occupational health and safety regulations
- Carefully consider whether the exclusion of environmental or occupational health and safety regulations claims is appropriate, having regard to the company’s industry. Such claims can expose directors to personal liability and are a significant source of personal risk.
Director and Officer insurance checklist
By: Australian Institute of Company Directors
Directors should review and consider their D&O insurance carefully from the outset. We have a 10 questions checklist to assist directors to undertake this review in relation to his/her D&O insurance coverage.
|1.||Do I have a copy of the company deed of indemnity?|
|2.||Do I have a copy of the directors and officers liability insurance policy wording (D&O policy)?|
|3.||Am I listed (by name or role) as an insured under the D&O policy?|
|4.||What risks, errors and claims does the D&O policy cover me for?|
|5.||Does the policy cover me for the period of time I need it to cover me?|
|6.||Are the policy limits ($A) appropriate?|
|7.||Is the D&O policy the right product for me (e.g. is the relevant company publicly listed, private, not for profit)?|
|8.||What are the common extensions to policy coverage and are there any needs specific to my industry or circumstances that should be specifically addressed in my D&O coverage?|
|9.||Are there any exclusions that I am not comfortable with?|
|10.||What should I do when there is a claim?|
You will see from the questions above D&O insurance policies are particularly complex. Every company is different. Every director is different. You should consider obtaining independent legal advice about your D&O policy and the coverage it provides you.