Directors’ and officers’ liability insurance (D&O insurance) is designed to protect directors and personnel involved in the management of a company from claims arising from decisions and actions taken in performing their duties on behalf of the company.
It is important that directors have appropriate arrangements in place to mitigate any liabilities and meet any legal costs incurred in defending claims. These arrangements will typically comprise:
- D&O insurance – insuring both the director and the company in respect of that liability; and
- an indemnity granted to the director by the company – for example, by way of a deed of indemnity.
This latest director tool provides guidance for non-executive directors who are seeking to understand or review their D&O insurance coverage.
The tool examines:
- Why do you need D&O insurance?
- What is the interaction between D&O insurance and a deed of indemnity?
- Side A and Side B covers, and Side C cover
- What is generally covered by D&O insurance?
- What is the process for obtaining D&O insurance?
- How to consider D&O insurance policy limits and excess
- What happens if a notification and/or an insurance claim needs to be made?
- The Australian D&O insurance landscape
There are some risks that directors must accept personally, and D&O insurance and deeds of indemnity should be viewed as complementary to other risk management measures. These include being actively committed to adhering to good governance practices and ensuring governance structures are effective and well-executed.
Further resources and reading for directors: