Why a director personal assets are exposed, and what D&O actually covers
Company indemnity fails exactly when it is needed most: when the company cannot pay.
Directors and officers can be held personally liable for decisions taken in that capacity. Most companies promise to indemnify their directors. That promise depends on the company being solvent and willing, which is not the situation in which most claims arise.
Who brings these claims
- Regulators and government authorities
- Shareholders and investors, particularly after a funding round
- Employees, on employment practice grounds
- Creditors, customers and competitors
What the policy responds to
- Defence costs, which usually dominate the claim
- Settlements and awards where insurable
- Investigation costs, including regulatory inquiries
- Company reimbursement where it did indemnify
Where it stops
- Deliberate dishonesty and personal profit, once established
- Known circumstances before inception
- Bodily injury and property damage, which belong on other policies
- Fines and penalties where law does not allow them to be insured
If your company has taken outside investment, has independent directors, or operates in a regulated sector, this cover is generally no longer optional.