Q

What does a D&O Policy Cover?


 

ANS

Directors and Officers Liability Insurance protects company directors and officers against claims arising from their wrongful acts whilst managing their business.

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Q

What is an officer of a company?


 

ANS

An officer can be any individual within a company who makes decisions which affect the company. The title "officer" depends on what an individual does rather than what he is called.

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Q

What D&O limit of indemnity should my client buy?


 

ANS

The limit of indemnity chosen by your client should be a combination of what they perceive their exposure to be and how much they are prepared to spend. Remember that this insurance protects your client's personal assets.

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Q

Is corporate liability the same as corporate reimbursement?


 

ANS

No. Corporate reimbursement reimburses the company when the company has paid indemnity or defence expenses on behalf of one of its directors or officers; it is included in most directors and officers policies as standard. Corporate Liability cover extends the policy to include protection for the company's own liability and defence expenses.

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Q

What are the differences between a D&O policy and a legal expenses policy?


 

ANS

There are many differences; a D&O policy will include cover for compensation awards and settlements as well as the cost of the defence whereas a legal expenses policy will only usually cover the cost of defence.

Most legal expenses policies include a "prospect of success clause", this says that, if in the opinion of the insurer the likelihood of winning the case is less than 50% they will not offer cover. Your D&O policy has no such clause and will respond regardless of likely outcome.

Legal expenses insurers will insist upon use of their own in house counsel and the Insured is required to immediately notify the Insurer of any potential claims without taking any action whatsoever. If the Insured deviates from these rules or responds in any way to the claimant, cover may again be denied with the Insurer claiming that any possible defence has been prejudiced. Whilst your D&O insurer will still require notice as soon as possible, any contact prior to such notice will be considered and any potential resulting prejudice will be assessed prior to a coverage position being determined.

Investigation costs and expenses are covered by both legal expenses and D&O policies although a legal expenses policy will specify for which organisations investigation expenses are included whereas an Angel D&O policy does not limit this.

A D&O policy will not cover any prosecution costs.

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Q

Does a D&O policy include employment practices liability cover?


 

ANS

Our Directors & Officers Policies provide employment practices liability for individual Directors and Officers as standard, however, this only extends to claims made against Directors or Officers personally. In order for the company to be protected against employment practices claims they will need to purchase our Employment Practices Liability Extension. Nearly all employment practices claims are brought against the company but very few will specifically name a director or officer.

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Q

What happens if the Insured has bought the corporate liability extension and the company uses the entire policy limit defending themselves, will the directors and officers be without cover?


 

ANS

Our Corporate Liability Extension has an additional limit for unindemnifiable loss which applies solely to claims made against individual directors or officers should the policy limit be completely eroded. The limit available for this extension is 50% of the policy limit subject to a maximum aggregate limit of £250,000.

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Q

Does the D&O policy cover investigation costs?


 

ANS

Our D&O policy covers the defence costs involved in any "formal" investigations initiated by any organisation. It is important to note that this does not extend to the internal investigations initiated by the company itself.

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Q

Is Corporate Manslaughter covered?


 

ANS

Where the policy has been extended to include corporate liability the policy will respond to allegations of Corporate Manslaughter.

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Q

Do you have any claims examples?


 

ANS

Yes. These are accessible on our website in the resource centre.

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Q

If there are several companies under the same ownership can they all be covered under one policy?


 

ANS

Our D&O Policy includes cover for subsidiary companies where the holding company is named as the Insured. Therefore, to ensure that cover is in place for all subsidiaries it is vital that cover is purchased in the name of the holding company and that the turnover disclosed is the consolidated turnover for all operating companies. If a policy is taken out in the name of any subsidiary company neither the holding company nor any other subsidiaries (other than any subsidiaries of the named Insured company) will be covered.

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Q

Why do I need to provide a signed and dated declaration?


 

ANS

The Declaration needs to be signed and dated by the Insured as this confirms the statements of fact upon which quotations and policies are provided and confirms that all material information has been disclosed. This information is relied upon when insurance is quoted, determining the premium payable by the Insured and assessing the applicable terms and conditions for the policy.

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Q

Why are partnerships treated differently to companies when it comes to offering a D&O policy?


 

ANS

In a partnership there is no corporate entity so any contracts that are entered into have to be done in the name of one or other of the partners. For example the photocopier in your office is very likely leased, perhaps from Ricoh or Rank Xerox etc., this lease agreement will be between your company and the lease company, but a partnership cannot lease in the name of an entity because none exists and as such one or other of the partners would have to take out a personal lease, thus the exposure to the partners is significantly higher than for a company director.

If they were a limited liability partnership (LLP) that would be slightly different inasmuch as, whilst the business is not incorporated the partners have organised themselves into an entity and are therefore treated as such.

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Q

If I am asked to insure two or more companies with common directors can I place them on one policy?


 

ANS

If there are two or more businesses with the same directors they would need to buy separate D&O policies unless there is one overall holding company in which case if the policy is bought in the name of the holding company the policy will cover the directors and officers of the holding company and all subsidiaries (as per the definition of “Company” in the policy wording). If however the two companies are only linked by the common directors separate policies are necessary because of the cancellation provisions of the policy which will serve to cancel the policy in the event that one or other of the companies experiences a merger, acquisition, takeover, becomes insolvent or goes into liquidation in which case the surviving entity will have no cover. Because of the way the definition of a “Subsidiary” works companies covered under a policy where a holding company is the named insured, where one of the subsidiaries experiences a merger, acquisition, takeover, becomes insolvent or goes into liquidation, are still covered by the policy whereas cover only for the affected subsidiary will no longer apply.

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