AT A GLANCE
How the cover works
Directors and Officers insurance is designed to protect individuals when claims allege wrongful acts committed in their leadership role. Claims can come from shareholders, employees, customers, competitors, regulators, creditors or other stakeholders.
The policy is commonly written on a claims-made basis. Continuity, notification and the treatment of earlier acts therefore require careful attention.
COVER
What may be covered
- Defence costs for insured directors, officers and other defined individuals.
- Damages, settlements and awards where legally insurable and covered by the wording.
- Reimbursement of the organisation when it lawfully indemnifies an insured individual.
- Representation costs connected with certain investigations or formal proceedings.
- Selected extensions for retired directors, new subsidiaries, extradition or crisis events where offered.
Cover varies by insurer and applies only as stated in the schedule and policy wording.
BOUNDARIES
Common exclusions and limitations
- Fraud, dishonesty or personal profit, often after established by final adjudication or admission.
- Known claims or circumstances and matters notified under an earlier policy.
- Bodily injury and property damage, subject to limited defence-cost or employment-related carve-backs.
- Claims between insured parties where the wording does not preserve relevant exceptions.
- Fines, penalties, taxes and liabilities that cannot lawfully be insured.
This is not a complete list. The quotation, schedule and full wording determine the actual cover.
CLAIMS IN PRACTICE
How a claim might arise
01. A creditor alleges that directors continued trading while the company’s position was deteriorating.
02. A shareholder claims that misleading information influenced an investment or business decision.
03. A regulator begins an investigation requiring individual directors to obtain legal representation.
These scenarios are illustrative only and do not confirm that a particular claim would be covered.
CHOOSING COVER
Questions worth resolving
- Review who qualifies as an insured person, including shadow directors, officers, committee members and employees in managerial roles.
- Understand Side A protection for individuals and Side B reimbursement for the organisation.
- Protect continuity when changing insurer and disclose known circumstances correctly.
- Check insolvency, regulatory investigation, employment and entity-related provisions.
- Select a limit considering that multiple directors may share one aggregate amount.
CONNECTED RISKS
Related protection to consider
- Management Liability where the organisation also needs Corporate Legal Liability and Employment Practices protection.
- Trustee Liability for charities and not-for-profit office holders.
- Professional Indemnity for claims arising from services or advice supplied to clients.
- Cyber Insurance where governance allegations may follow a technology or privacy incident.
QUESTIONS
Frequently asked questions
Does the company’s limited liability protect directors personally?
Not in every situation. Directors can face personal allegations, investigations and defence costs arising from their duties.
Does the policy cover the company?
A traditional D&O policy focuses on individuals and company reimbursement. Entity cover may be limited or provided through Management Liability.
What does claims-made mean?
The policy generally responds to claims first made and notified during the policy period, subject to the wording and prior-knowledge provisions.
Are former directors covered?
They may be, particularly for acts during their insured role, but run-off and continuity provisions should be checked.
Australian insurance context
For Australian organisations, Directors and Officers Insurance Guide should be considered against the actual activities, location, scale, contracts, assets and risk controls of the business. Insurance requirements and insurer appetite can vary by state or territory and by the way the risk is presented.
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