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Directors and Officers Liability

Why Directors & Officers Management Liability Insurance?

The reason For Directors and Officers Liability Insurance is “The expansion of global footprints of Indian companies, Stringent and Complex Regulatory Environment, increased shareholder litigation”.This has made the job of Directors and officers of company more challenging. It is a fact that virtually everything they do creates the potential for second-guessing and perhaps claims by persons adversely affected by their actions and decisions.

As per the Newly introduced Company Act 2013, the Director duties are defined as

  • A director of a company shall act in accordance with the Articles of Association (AOA) of the company.
  • A director of the company shall act in good faith, in order to promote the objects of the company, for the benefits of the company as a whole, and in the best interests of the stakeholders of the company.
  • A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
  • A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
  • A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
  • A director of a company shall not assign his office and any assignment so made shall be void.
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Also to note, the definition of “Officer who is in default” is widened to include Key Managerial Personnel.

D&O Liability Insurance can help protect directors and officers against the financial burden of litigation, damage to their reputation and loss of personal assets.

Cover for legal costs and expenses is important as litigation involving company directors and officers is often complex and expensive. It is imperative that they have access to specialized and quality legal representation to safeguard their interests in the most effective way.

Directors & Officers (D&O) Management Liability Insurance is the solution that provides company directors and officers with the confidence to deal with the challenges of business. Should they be faced with civil litigation or criminal prosecution, they can be rest assured that Insurer can afford them assistance and protection

  • Who may claim against Directors & Officers?

    Shareholders – Individual shareholders may bring personal action against individual company directors & officers as a result of wrongful act or omission
    Employees – For employment related matters such as unfair dismissal, unlawful discrimination, sexual harassment, or mismanagement or unfair administration of superannuation funds
    Regulatory Authorities – Investigation, inquiry or prosecution by regulatory bodies such as the SEBI, Revenue Department etc.
    Customers – For misrepresentations made in advertising material or deceptive trade practices.
    Creditors – For continuing to trade whilst the company is insolvent. In addition, creditors may bring civil actions alleging illegal payment of dividends if the company has distributed dividends to shareholders.
    Competitors – For defamation or misleading advertising that unfairly compares the company’s product to that of the competitors. A A competitor whose copyright has been infringed may bring a civil action as well.
  • What is Covered?

    1. Negligence
    2. Wrongful Misrepresentation
    3. Breach of Trust
    4. Breach of Fiduciary duty or breach of warranty of authority
    5. Unlawful default including out of court settlements
    6. Defense costs and expenses
    7. compensatory damages awarded against the company directors and officers
  • What is not covered?

    1. Prior or pending litigation
    2. Asbestos related liability
    3. Bodily injury claims
    4. Liability in consequence of any position held by an Insured Person as an Employee Benefit trustees
    5. Professional Services related claims
    6. Claims arising out of Securities Offerings
    7. War & Terrorism
    8. Liability in consequence of any external positions held by any Insured Persons
    9. Loss arising out of Property Damage
    10. Actions brought by Substantial Shareholders
    11. Claims caused by unscrupulous behavior of Insured Person(s)
  • What is Additionally Covered?

    1. Libel and Slander
    2. Employment Practices Liability
    3. Official investigations and enquiries
    4. Previous Securities Offering
    5. Intellectual Property
    6. Blanket subsidiary cover
    7. Severability and Non-Imputation Additional notification period
    8. Advance payment of defence costs and expenses
  • What can be covered on Payment of Additional Premium?

    1. External Positions
    2. Prospectus liability for current and future offerings
    3. Entity protection for critical occurrences
    4. Pollution
    5. Joint Venture Liability
    6. Entity Protection for Securities Claims
    7. Entity Protection for Employment Related Matters
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Ethika Insurance Broking Pvt. Ltd. IRDAI Certificate No: 574, Date of License: 8th  Aug 2019, License valid till 7th Aug 2022,
Registered Address: 517, B Block, Vijaya Raghwa Township, Nallagandla Bypass Road, Lingampally. 500019
Principal Officer: Susheel Agarwal, Contact Details of Principal Officer: susheel@ethika.co.in +91 8498094600,
Directors: Susheel Agarwal and Suresh Agarwal, Category of License: Direct (Life and General).

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