- Unlike other commercial insurance policies, the main beneficiary is not the company itself, but the directors, managers and supervisors of the company. Although D&O policies may refer to the company as ‘the Insured’, this is done for administrative purposes so that there is one centralised point of communication between the Insurers and all the policy’s beneficiaries.
- Almost all of the policy’s cover is designed to indemnify the Insured Persons (whether directly or indirectly through the reimbursement of legal expenses). The policy defines Insured Persons as the company’s directors, managers and supervisors.
- Other people also covered by the policy include:
- Anyone named as a co-defendant in a legal action brought against an Insured Person. If the manager and his secretary are both sued, then the secretary is automatically also covered.
- The Insured Person’s spouse. If the Spousal Liability extension is selected then the policy will indemnify the Insured Person’s spouse if they suffer loss as a result of being married to the Insured Person. Example: If two people are married in community of property, there is a risk that the spouse could also lose their assets when the Insured Person’s assets are seized by the sheriff.
- The Spousal Liability extension covers the loss that the spouse of an insured person (but only in their capacity as the spouse of the wrongdoer and not for their own wrongful acts).
- The company does nonetheless have some cover:
- It will be reimbursed for the amounts which it has paid as legal defence costs of a claim brought against the directors and officers.
- If the Company Securities extension has been selected then there is cover for claims brought against the company for its alleged unfair dealing it is shares and other securities.
Directors and Officers Liability