We have already discussed the two key covers your business gets in a directors and officers insurance policy:
- Your executives' personal liability cover for claims arising against your business due to their decisions
- Your indemnification cover for any damages your business pays in the managers' stead for settled claims
Typically, your policy will provide you coverage for the business' former, current, and future directors and officers - and also those of any subsidiaries you have. Of course, this coverage is valid only during the period of your policy's effect, although that may change if your policy terms include an agreed upon extended period for reporting even after the policy has been terminated.
Your directors and officers insurance coverage will not typically include cover for intentional non-compliance of business rules and regulations. This means if the guilty manager deliberately sabotages the situation, and this intent is proven with evidence, your insurance carrier will not pay for any damages your business has to suffer as a result.
In other words, fraud and criminal actions are not covered in directors and officers insurance. This is particularly true for situations where non-compliance led to illegitimate remuneration or benefits to one or more directors or officers.
When it comes to the question of getting D&O insurance coverage, an important thing to remember is what happens if you do not have this insurance and your business faces a claim. In such cases, the organization holds the managers involved responsible, who have to personally pay for the legal damages, threatening their financial security and career.
This is something you surely do not want to happen.