Directors & Officers Liability Insurance

Directors and Officers Liability insurance policies should no longer be considered optional or reluctant insurance purchases. In the last few years insurers have seen a dramatic growth in claims against directors and company executives. The number of large claims, including class actions, has surged in Australia in recent years on the back of well organised and legitimate funding arrangements and regulatory changes which allow aggrieved claimants to focus not only on directors but personnel in non-executive and management roles.

The Australian Securities and Investments Commission has gathered new revised powers and momentum and has shown no sign of losing enthusiasm in chasing directors and executives even to the point of issuing proceedings against an entire board in the James Hardie case. Recent high profile decisions in Australia provide a more seamless mechanism for parties like creditors to launch actions against directors. Securities claims are no longer novel events and Insured’s are demanding more comprehensive cover.

It is not only the big public companies that are targets for D&O claims. Private companies directors and officers are also exposed. Private companies and their directors continue to face greater corporate governance and increasing regulatory surveillance of the management of their business activities.

Private companies should consider purchasing a Management Liability policy. A Management Liability Insurance Policy is intended to provide protection not only for the assets of the individual directors and officers but cover is also extended to the company for defined exposures. This is done by firstly broadening traditional D&O coverage and then incorporating it with a number of other insurance covers under the one policy.

Features of a Management Liability Insurance Policy typically include:

  • Directors and Officers Liability
  • Company Reimbursement
  • Company Liability
  • Employment Practice Liability
  • Trustee Liability
  • Fidelity
  • Business Crisis Consultant Fees
  • A set number of hours of legal advice

What is Management Liability insurance?

Management Liability protects the individuals and the company in relation to the exposures associated with managing a company. The key elements to the cover are as follows:

Directors and Officers: covers the Directors and Officers (including where the company can reimburse the directors) for any claim alleging a Wrongful Act (negligence, breach of duty, misrepresentations) by a Director or Officer

Company Cover: covers the Company where there is a claim against the entity alleging wrongful acts

Employment: covers the Company for claims alleging an employment breaches including wrongful dismissal, discrimination, harassment, deprivation of career opportunity, breach of contract etc

Trustee: for trustees of staff superannuation fund

Crime: covers the company for theft by its employees

Types of claims you or your company could face include:

  • breach of directors’ or officers’ duties
  • breach of fiduciary duty
  • defamation
  • breach of the Trade Practices Act, and other statutes
  • occupational health and safety proceedings
  • infringement of intellectual property rights.
  • breach of confidentiality.
  • allegations of illegal or improper conduct

What are Management Exposures?

A company and its directors face both personal and corporate liabilities from numerous stakeholders including the following:

  • Shareholders
  • Employees
  • Competitors
  • Creditors
  • Regulators
  • Customers
  • Liquidators / Administrators

When a breach of company law or regulation is alleged, the focus is on your conduct as a manager and as a company. You may think a claim is completely baseless or without merit, but it will still cost time and money to defend successfully.

There are a number of insurance companies offering this cover and their products can be significantly different. This is where we can help. We will work with you to identify your specific needs and arrange a policy that is appropriate and cost effective.

Hi David,
I have to congratulate you on making this such an awesomely easy process.
This is the way cloud technology should be used, a win-win for both parties.
Excellent! Love it!

Ed Henry
Director - Sage Australia Pty Ltd