Who is the D&O insurance aimed at?
D&O insurance is aimed at the company’s administrators and directors, i.e. any natural person who has been or is going to be appointed as an administrator, member of the board of directors, general manager, managing director, managing director, manager or member of the management committee or in a similar position that performs management and direction functions.
Why is it important to take out directors’ and officers’ insurance?
Directors’ and officers’ insurance protects the company’s own assets and those of the company against unforeseen events in the course of business and provides security against management claims.
Moreover, the risks of corporate governance today no longer affect only large companies, but increasingly also small and medium-sized companies, and the number of claims is constantly increasing.
What situations can directors’ and officers’ insurance cover?
This insurance can cover claims and claims of various kinds, such as:
- Claims from creditors and suppliers for non-payment or breach of commercial contracts.
- Claims from employees for dismissal, breach of contract, harassment, bullying, etc.
- Claims from competitors for unfair competition, espionage, etc.
- Claims from partners and shareholders for mismanagement.
- Complaints from public bodies for non-compliance with regulations.
- Claims from customers for non-compliance.
It is important to be prepared for any of these situations.
What are the most common risks faced by the leaders of a company or organisation?
The most common risks arise from wrongful conduct in the performance of their duties. Directors, administrators or managers can be prosecuted in four different civil actions:
- Individual action for contractual liability
- Joint action
- Civil liability for corporate debts
- Liability for the company’s insolvency proceedings.
In addition, there is often a cost of bail for directors and officers in court proceedings in which they are required to post a bond.
What is the claims-made principle?
The claims made principle defines the point in time at which an insured event occurs.
It is essential that the claim is made within the insurance period.
The claims made principle
also integrates previously caused economic losses into the insurance cover (retroactive cover).
Who takes out the insurance, the company or the individual director?
The company is the insurer (policyholder) and the manager is the insured.
Interestingly, not only the policyholder (contracting party) but also the company itself can claim against the manager for financial losses caused by the management of the insured.
Is it necessary to identify the insured?
It is not necessary to identify the insured parties, as the policy offers coverage to natural persons who have been, are or will be directors, executives, managers or similar positions that exercise functions that imply the exercise of powers of administration and management.
Therefore, it is not necessary to specify names or positions; however, in some cases and for newly created positions, it is advisable to specify this position or responsibility in the policy.
Is there a limited number of insured persons?
There is no limit on the number of persons or positions insured by the policy, as it extends its coverage to all persons with administrative or managerial positions in the company, with no restrictions as to the number or title they hold.
Are there any tax advantages?
The cost of directors’ and officers’ liability insurance is accounted for in the books of the company taking out the policy.
Does the D&O insurance apply as a benefit in kind for the insured person?
No. The payment of the premium by the company is a benefit in kind, but it is not taxable to the insured, who is considered an “employee”, regardless of rank or position, which excludes directors and officers.
Am I still covered by the policy after I leave the company?
The insured is covered for up to four years after the termination of the policyholder’s company, as this is the legal period during which administrators and directors retain the responsibilities derived from their management.
