What D&O Insurance cover - Directors and Officers (D&O) Liability Insurance

What D&O Insurance cover - Directors and Officers (D&O) Liability Insurance

D&O cover. Let's talk about it. You may be reading this because an investor or non-executive director asked you to get D&O insurance, or you might have seen in it the media lately with high-profile publicity on founders.

Well, good news - you're in the right place. 

Also known as management liability insurance, D&O covers personal liability for any errors or mistakes allegedly made against the company's management team. 

 This also includes legal defense and costs and awards made against them. And by them, I mean all people in supervisory positions: effectively, anybody who has or had legal responsibility for your company  So, yes, managers can be covered by this policy.

What does D&O Insurance cover?

This cover is essential in covering entrepreneurs for risks they face in operating their business: from large publicly traded companies to startups with only a few employees, it covers directors for risks they may face personally the management of the company.

Many investors make it a requirement for D&O insurance for businesses they're looking to invest in, so, though not legally required, D&O insurance is worth considering before the next funding round. 

What D&O Insurance cover 

Just like a triangle, which is the strongest shape, the D&O cover also has three sides to it: 

  1. Covers the Ds and Os personally for any fines, penalties, and legal expenses
  2. Reimburses the company for paying on behalf of the directors and officers;
  3. It is for the company if it itself is named in a claim. 

And if a company faces any employment-related disputes. it's covered under employment practices liability (or EPL for short). 

Though it isn't always added in as standard, you can ask for it to be included. The truth is - when you're in charge, you have to make difficult decisions on a daily basis under intense pressure. And while you do your utmost to ensure that you're acting in the best interest of the company, sometimes you might make a mistake, or others claim that you have, anyway.

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When this happens, you personally could face fines, claims, legal expenses, disqualifications from being a director, or even a prison sentence. It's not worth it, so why risk it? 

Example Of Directors and Officers (D&O) Liability Insurance

Let's see: two founders were sued by their angel investors for changing their business activities, which resulted in losing their SEIS status. 

In another case, a director was accused of cyberbullying by a disgruntled employee and was sued for inflicting mental anguish.

D&O also provided cover for founders who were sued by their shareholders over claims of misrepresentation in a pitch deck.

We at Digital Risks had a software customer who was sued by their investors after a major supplier changed their terms of business, which rendered them inoperable overnight.

Obviously, the premium you pay depends on the stage of business, the type of work you do, and the limit of cover you select. But, as a rough guide, at Digital Risks we just wrote a D&O policy for a seed-stage tech company; the limit was set to 1 million and they paid just £20 per month, whereas a series A company could pay £30 per month and a Series B could pay £50 per month. In a nutshell, directors' and officer's insurance is essential for startups and growing businesses. 

It provides three-tiered protection to cover off risks faced by entrepreneurs from all angles. 

This includes personal mistakes, company ommissions, and cover for the business itself.

Best of all, you don't pay anything if you're named personally in a claim. Worldwide cover, insolvency, cyber bullying, employment practices, regulatory events, major shareholder claims - all at any stage of growth - we've got you covered.

Best thing - you can do it through an online platform - simple as that!


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