The decisions of directors do not always satisfy the expectations of the business owner.
Moreover, some actions of officers can lead to financial losses to the company. Besides this, the interests of third parties are not protected from wrongful acts of directors. As a result, the affected party goes to the court, and the company has to look for additional financial resources for legal services. The acquisition of D&O policy will allow you to secure your business from such outcome.
D&O-insurance (Directors and Officers Liability) is a liability insurance of a head of a company in case of a possible wrongful act in decision making process on organizing and running business.
Insurance companies increasingly offer to purchase D&O policy for companies and businesses to secure directors and senior managers liability to the third parties who may be affected and suffer losses as a result of mistakes, wrongful decisions of the director. Then the insurance company takes responsibility and covers all possible expenses of the company or organization. Therefore, the D&O policy is a very comfortable insurance in business.
Why do companies need D&O insurance policy?
D&O-insurance appeared recently in Ukraine, so it still raises many questions. In addition, many companies today continue to solve problems arising from mistaken management decisions by themselves. After all, their management believes that it is much easier to solve the problem "amicably", not to disclose the case so do not to spoil the reputation. Actually, this approach suggests a low level of insurance culture.
This type of insurance came to us with the first entry of domestic companies into the western market, where the practice of D&O-insurance has long been considered as a must have. In a fact, it always takes a lot of time and money to investigate disputes and court cases, and D&O policy allows the Insured to transfer these issues to the insurance company. Your business receives first-class legal assistance as soon as proceedings are initiated.
Moreover, Ukrainian legislation is actively progressing in this direction and already provides norms that impose responsibility on directors for their decisions.
For whom will D&O insurance policy match?
First of all, D&O insurance policy is recommended for companies that are planning to enter the western market. In many countries of Europe, as well as the USA, if you do not have D&O insurance policy, you will not get serious business partners. In France, for example, purchase of any franchise of the brand name is preceded by the acquisition of such policy.
D&O insurance covers:
- an owner of a company, if he personally runs the business;
- a director, a group of top managers;
- members of a supervisory board;
- other officers, who make responsible management decisions.
D&O insurance can be individual and collective. It should be noted that the whole company's activities are insured, not a separate contract or a separate service.
What cases does D&O insurance policy cover?
By wrongful acts of a director or top managers means:
- misstatement;
- misrepresentation;
- breach of trust;
- breach of authority;
- employment practice violation.
As a matter of practice, the insurance case can occur with the IT industry, media and cleaning companies, financial and legal organizations, the restaurant business and the fashion industry.
Standard D&O policy usually covers liability of top officials of the company, as well as defense and inquiry costs. The policy fully covers expenses of the company for court settlement issues.
The insurance company takes care of costs of a legal services, chosen by business, within court proceeding. Therefore, costs of attorneys are significantly reduced.
Authorities claims, customers, suppliers and creditors claims could be covered by the insurance Agreement. In addition, the policy covers securities claims. For example, you provided incorrect information about the growth of the shares value of your company or inaccurate data. People believed you, acquired securities, as a result their value did not rise to the stated figures for a certain period, and thus your clients suffered losses.
A prerequisite for risk assessment is the director’s unintentional error resulting from performance of duties. Otherwise, the insurance company may classify the wrongful professional act as fraud or personal profit. For such cases, insurance does not work. In addition, insurance does not cover violations of the law that led to opening of a criminal case. Before making payments, the insurance company must make sure that the insured does not violate the law.
What companies have to do to purchase D&O policy?
The most concerned in D&O insurance are those who directly make management decisions. But the insurer more often is a legal entity (company).
To purchase a D&O policy the owner of the company or its director should provide the insurer with full financial reporting. Moreover, the statements should be as transparent as possible, otherwise it will be impossible to calculate all the insurance risks and the insurance company will not conclude an agreement with you.
If you are just starting your business, the insurer may require a business plan in order to understand the possible ways of development for the newly formed company. All submitted documentation is carefully analyzed and an examination is carried out.
Benefits of Directors’ and Officers’ Liability insurance with “Colonnade Ukraine”
Insurance company “Colonnade Ukraine " besides the standard coverage of D&O policy, also offers its customers the extended cover, which includes:
- bail bond and civil bond premium;
- reputation recovery expenses;
- civil fines and penalties;
- company car replacement cost;
- cost of the necessary psychological care, etc.
Apart from that, with the extended cover you get several additional benefits:
- the retroactive date, which allows you to record the initial date of the contract enter in each subsequent, which guarantees uninterrupted insurance coverage;
- extended reporting period;
- the territory of coverage includes not only Ukraine, but could be the Worldwide.
If you are interested in this type of insurance, we will be happy to meet you and provide detailed answers on your questions. You can contact us by email: casualty@colonnade.com.ua.