 WHAT
IS DIRECTORS’ & OFFICERS’ LIABILITY
INSURANCE (D &O)?
• D&O insurance is
a legal liability policy which provides
cover for wrongful acts made by a Director,
Officer of a Company or its subsidiary whilst
engaged in such capacity.
WHAT TRIGGERS D&O
POLICY?
• D&O policy is triggered
by an allegation of wrongful act brought
against the Director or Officer, either
in writing or verbal communication. |
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| WHO MAY
FILE A CLAIM? |
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Principally the shareholders
should losses, occur due to certain circumstances,
i.e. resulting from a drop in share price
due to misleading statements, mergers or acquisitions,
or poor business decisions. Employees both
past and present may also bring allegations
of sexual harassment, wrongful termination
or any discrimination. Regulators, Customers,
business partners and any other third parties
may also file suits. |
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| WHO IS
COVERED? |
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All past, present and future
directors and officers of the Company, all
past and present employees of the Company
in supervisory or managerial positions. |
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| WHAT ARE
THE STRUCTURES OF A D&O POLICY? |
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It has 2 parts. PART A,
protects Directors & Officers from claims
where they are not able, whether at common,
statute or otherwise, to receive indemnity
from their Company. PART B is the Company
Reimbursement Section which reimburses the
Company for payments made to indemnify the
Directors & Officers for claims made against
the D&O insurance cover, where it is lawful
to do so and if part of the articles of incorporation. |
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| WHAT IS
A CLAIMS MADE POLICY? |
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This means that regardless
of how long ago a wrongful act complained
of was committed, the policy will respond
PROVIDED THAT THE CLAIM IS MADE DURING THE
POLICY PERIOD, subject to the retroactive
date stated in the policy schedule. |
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| WHAT IS
DISCOVERY PERIOD? EXTENDED REPORTING PERIOD? |
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Discovery Period is the
date when the claim or circumstances are made
known to the Insured. Extended Reporting Period
is the Period usually granted (either with
additional premium or free, depending on the
length or duration provided) to the Insured
to report the claims to the Insurer relating
to the wrongful acts committed while the policy
period is still in force. Extended Reporting
Period is usually availed/granted when the
policy will not be renewed with the existing
Insurer. |
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| WHAT IS
RETROACTIVE DATE? |
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For a first time policyholder
(i.e. no prior D&O policy), usually this
is at policy inception only (date of instruction
to issue the policy). This is the reckoning
date on which wrongful acts will be covered
under the policy and which effectively excludes
claims arising from things done or ought to
have been done before the retroactive date. |
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| CAN FULL
RETROACTIVE DATE BE GRANTED? |
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On a case to case basis
and depending on the underwriting information,
a full retroactive date could be granted,
which means that no matter how long ago a
wrongful act, it will be covered provided
this is notified to the Insurer within the
policy period. |
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| WHAT IS
PRIOR OR PENDING DATE? |
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This is the reckoning date
where any prior or pending suits or demands
is limited to the “Prior or Pending Date”
stated in the policy schedule. This means
that this ought to exclude existing claims,
prior or pending proceedings against the D&O. |
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| WHAT IS
TERRITORIAL LIMIT? JURISDICTION? |
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Territorial Limit is where
a covered wrongful act is committed. If a
Company is dealing with international clients,
it is advisable to purchase a “Worldwide Territorial
Limit Cover”. Similarly, for Jurisdiction
where the legal action is brought or commenced
in an overseas jurisdiction, worldwide cover
is an option. |
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| WHAT IF
THE D&O OF “COMPANY A” IS ALSO A D&O
IN “COMPANY B”, WILL THERE STILL BE COVERAGE? |
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If any of the Director
or Officer has an “External Position” or occupies
a Directorship in an Outside Entity or External
Entity, this must be declared to the Insurer.
Otherwise, the Director or Officer will not
be covered, except on certain conditions as
may be provided by the Insurer automatically.
One of these automatic conditions is if the
External Position/Outside Directorship is
in a Non-Profit Organization. |
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| WHAT IS
ENTITY COVER? |
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Essentially, D&O policy
is triggered if a claim is brought against
the Director and/or the Officer. If the claim
is brought against the Corporation itself,
it is not covered unless there is an “Entity
cover”. An Entity Cover is extended for a
specific matter only and is not an automatic
cover, i.e. Securities and Employment Practices
Entity Cover. |
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| WHAT ARE
THE MAJOR EXCLUSIONS? |
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a. |
Property Damage and Bodily
Injury Claim (as this is a subject of a Public
Liability Policy) |
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b. |
Professional Indemnity |
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c. |
Product Liability |
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d. |
Pollution Liability |
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e. |
Intentional Acts, Dishonesty
and Fraud |
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f. |
Insured vs. Insured |
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g. |
Major Shareholder Claim |
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h. |
Fines, Punitive Damages |
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i. |
Pension Fund Liability |
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k. |
Outside Directorships |
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l. |
Known Circumstances |
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m. |
Employment Practices |
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n. |
Failure to Secure Insurance |
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| WHAT ARE
THE UNDERWRITING INFORMATION REQUIRED? |
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a. |
Duly accomplished, signed
and dated D&O Application Form |
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b. |
Annual Report/Financial
Report or audited statement |
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c. |
Claims Information |
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d |
Declarations on any Press
Releases |
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e. |
Website Details and Rating
Agencies, if any |
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| HOW CAN
A D&O POLICY PROTECT LIABILITY EXPOSURES
ARISING FROM INITIAL PUBLIC OFFERINGS AND
FUTURE SECURITIES OFFERINGS? |
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A D&O policy could
be extended to cover against wrongful act,
misleading statement, misstatement, neglect
breach of duty or breach of trust in relation
to any document including any prospectus or
information memorandum issued by the Company
in connection with the Securities Offering
both from the initial offering, or previous
offering, or to securities offering done during
the policy period. |
