What Is Directors' and Officers' Liability Insurance?
D & O insurance quite simply is designed to protect Directors and Officers against personal liability that they may incur in respect of amounts which they are liable for, in respect of claims made against them arising out of the performance of their duties.
Therefore a simple definition would be:
"Protect Directors and Officers from Loss resulting from Claims made against them in the discharge of their Duties on behalf of the Company"
Example of the types of personal liabilities are:-
Civil Damages or Settlements
Financial Losses suffered by third parties
What Does A D & O Policy Cover?
Quite simply a D & O policy covers "Directors and Officers (insured persons)" for "claims" made against them alleging a "wrongful act" first made and notified during the policy period .i.e. This is a claims made policy.
A Claim is essentially....
Any notice received by an insured, alleging a Wrongful Act. A notice can be any writ, summons, letter or any other advice.
The real guts of the Policy is the "definition of Wrongful Act". It is "Any actual or alleged act, error, omission, misstatement or misrepresentation by an Insured(s) whilst acting in their capacity as Directors or Officers of the Company."
This is a very broad definition and is really only limited by the policy exclusions or conditions.
Why Buy D & O Insurance?
To protect personal assets
Provides peace of mind to Directors and enables them to defend their good name and professional standing
Provides financial protection to the Company where reimbursement is a factor
It may be available when corporate indemnification is refused or legally prohibited, or where corporate insolvency is an issue
Insurance can offer broader cover than indemnification
Insurance gives Directors and Officers to take commercially justifiable risks
This policy protect the exporters and manufacturers against any loss, damage or injury caused by a particular product.
Today, in world markets everywhere, consumers are becoming more aware of their rights and are quicker to exercise those rights by filing product liability suits against exporters and manufacturers.
One claim could lead to severe financial strain on business - and might even lead to financial ruin.
What does the policy pay for?
The policy provides cover for
Any investigative work necessary to verify the cause of injury / damage
Any damages awarded by court
Three areas of Liability
Failure on your part to exercise reasonable care in the manufacture of a product.
2. BREACH OF WARRANTY
When a product is sold, there is an implied warranty that the product is fit and suitable for the purpose for which it was manufactured. If the product does not meet this standard, the manufacturer is in breach of warranty.
3. STRICT LIABILITY
Which assumes that the manufacturer, distributor or others are at fault and the onus to prove otherwise lies on them.
Why buy Product Liability Insurance?
Provides financial protection to the Company
There are major international companies who will only do business if there is cover against this type of liability.