16 Apr Understanding directors and officers (D&O) insurance
Running your own show can be exciting and rewarding, personally and financially, but it’s not without its risks. There’s lots that can go wrong and if it does the buck usually stops with you and your fellow owners and directors – figuratively and literally.
Should a supplier, customer or employee decide to take legal action against you personally, you could find yourself in for a protracted, stressful and expensive battle to protect your personal assets and the security you’ve worked hard to build..
Directors and officers (D&O) insurance, known as management liability insurance in the context of small and medium-sized businesses, is recommended by small business specialists and advisers who’ve seen small business owners struggle to recover from litigation they’ve failed to prepare for financially.
And it’s not just directors of commercial enterprises that can end up in hot water – directors of not-for-profit organisations may find themselves similarly exposed, should something go wrong.
What’s covered
A D&O policy can cover you for liabilities and legal costs associated with defending claims against you made by third parties, for allegedly wrongful acts you’ve committed in your capacity as a director or officer.
Available from most major insurers, management liability cover can provide protection for executive directors, non-executive directors, company secretaries and other members of your senior management team for acts they perform, or fail to perform, while working in those roles.
If, for example, a manager responsible for workplace health and safety is alleged to have failed to mitigate risks adequately and an employee who’s incurred an injury decides to sue them, the D&O insurer may cover defence costs and damages.
What’s not covered
What D&O insurance won’t cover are the costs associated with any act, omission or issue that arose before your current policy was taken out and which you knew, or should have known, was likely to trigger a claim.
Other typical exclusions include fraud, illegal and personal profits and gains, fines and penalties that can’t legally be insured against.
These policies do not cover your own fraud, but they may cover you for loss suffered as a result of fraudulent acts by some other person.
Mitigating the risk
Management liability cover can be complex and working with an experienced broker can help you find a policy that meets your needs, according to Steadfast broker technical manager Michael White.
“Analysing the size, structure and scope of your organisation along with its circumstances and risk profile will help determine the level of cover that’s appropriate for you and your leadership team,” White says.
“Protecting them and yourself from some of the risks associated with business leadership in today’s times can provide the peace of mind that allows people to do their best work.”
Cover when it counts
If you’re the director of a small business or considering becoming one, it’s a good time to explore the benefits of management liability insurance, or to review your level of cover to see if it remains right for your circumstances. Contact your Steadfast broker today to discuss your policy options.
Important notice
This article is of a general nature only and does not take into account your specific objectives, financial situation or needs. It is also not financial advice, nor complete, so please discuss the full details with your Steadfast insurance broker as to whether these types of insurance are appropriate for you. Deductibles, exclusions and limits apply. You should consider any relevant Target Market Determination and Product Disclosure Statement in deciding whether to buy or renew these types of insurance. Various insurers issue these types of insurance and cover can differ between insurers
Important notice – Steadfast Group Limited ABN 98 073 659 677 and Steadfast Network Brokers
This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.
Information is current as at the date the article is written as specified within it but is subject to change. Steadfast Group Ltd and Steadfast Network Brokers make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of Steadfast Group Limited.
Important notice – Watkins Insurance Brokers Pty Ltd ABN 23 059 370 455, AFSL 244427
This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.
Information is current as at the date the article is written as specified within it but is subject to change. Watkins Insurance Brokers Pty Ltd make no representation as to the accuracy or completeness of the information. Various third parties have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of Steadfast Group Limited.
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Source: – https://www.steadfast.com.au/well-covered/business-insurance/what-is-directors-and-officers-insurance/