What Is Directors and Officers Insurance?

Directors and officers insurance (D&O insurance) is designed to protect the directors and officers of a private and/or public company.

The insurance protects them for alleged wrongful acts including claims of mismanagement, for example breach of fiduciary duties, of the company. These legal actions or investigations of wrongdoings are typically brought by shareholders, employees, regulators, creditors, competitors, liquidators and others. D&O Insurance can also be extended to cover the entity for security, employment practices liability and statutory liability to protect the balance sheet of the company.

Directors and officers insurance

What Does Directors and Officers Insurance Cover?

D&O policies are typically structured with three insuring clauses – Side A, B & C

Please have a look at our “how does D&O insurance works” article to understand how a D&O policy responds.

Side A Coverage (Directors & Officers/Insured Persons)

Insurance protection for the Directors and Officers when indemnification is not available to the Directors and Officers of the company resulting in a personal liability risk – Its sole purpose is to protect the individual directors and their personal assets and is the final protection if the company is unable to indemnify the Directors & Officers itself.

Side B Coverage (Company Reimbursement)

Insurance protection for the Company when they indemnify a Director and/or Officer of the company, in the form of a reimbursement from the insurer. Side B is a form of balance sheet protection for the company and the transfer of the indemnity exposure that is agreed in the company’s deed of indemnity.

Side C Coverage (Entity Securities Liability)

Insurance protection for the entity’s own liability, specific to securities laws. It is balance sheet protection in the event the company is also named in a securities claim. Historically, Side C coverage was difficult to obtain in Australia due to recent claims trends. However, the market has evolved and coverage can now be provided from various insurers.

Additional Coverage and Policy Options

01

Statutory Liability

Statutory Liability insurance is protection for the Directors & Officers and the company (when applicable) for a claim alleging a statutory breach. Some examples of the types of statutory investigations and claims are Workplace Health & Safety, Employment Practices Laws, Environmental Protection Authority, Spam and Privacy Laws. Statutory Liability is typically included for the Directors & Officers but not the entity on Directors’ & Officers’ policies. Statutory Liability is an option that can be added to most D&O policies for an additional cost or can be purchased as a standalone policy.

02

Employment Practices Liability

Employment Practices Liability (also known as EPL) insurance is protection for the Directors and Officers and the company (when applicable) for a claim alleging an Employment Practices Breach. Employment Practices Liability is an additional inclusion for the Directors and Officers but generally not for the entity. Examples of matters which fall under the category of EPL are wrongful dismissal, sexual harassment, discrimination, bullying, whistleblower actions. Entity Employment Practices Liability is an option that can be added to most Directors and Officers policies for an additional cost.

03

Excess Side A

As outlined above, Side A coverage is protection specifically for the Directors & Officers. Depending on how a D&O insurance program is structured, Directors & Officers may be left exposed due to sharing the limit with the company (Side C). An option to further protect the Directors & Officers is to purchase an Excess Side A limit or policy. Some Directors & Officers policies include a small additional limit of Side A in excess of the policy limit if the Side A limit is fully exhausted. There are also insurers that are now offering Excess Side A policies as a stand-alone policy to sit in excess of the master policy.

04

Prospectus Liability Insurance

Prospectus Liability Insurance is a type of coverage that can be purchased on a stand-alone basis to respond to claims alleging a breach of securities law in connection with a specific prospectus. For more information on Prospectus Liability, please see our blog post @ Prospectus Liability Insurance

05

Run Off Coverage

Directors and Officers policies have a Change in Control provision that states that upon a Change in Control the policy will only respond to wrongful acts or conduct that has occurred prior to the effective date. To pick up the exposure post Change in Control date, the insured should purchase a Run-Off policy to cover the Directors and Officers exposure from that date forward. The Run-Off policy is usually purchased for 7 years to match the statute of limitations in Australia.

 

Example of a D&O Runoff Policy

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Quote Requirements for Directors and Officers Insurance

Public Companies have most of their information available to the public, but we recommend the following for our quoting process:

 

  • Completed proposal form
  • Prospectus or information memorandum
  • Corporate Presentation / Business Plan to show a summary of where the company is at and where it is heading
  • Insurer meeting with key executives (sometimes press releases, financials and the proposals forms don’t tell the full story, in which case we recommend a meeting with the insurers, so they become more familiar with the company and key people)
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D&O Specialists

01

Taking a Deep Dive to Understand the Board’s Risk Profile

  • Comprehensive risk profile assessment to completely understand your risk requirements.
  • Customised strategy, ensuring solutions and advice are tailored to suit those specific needs.
02

Meeting Your Board Requirements

  • Continuously reviewing, assessing and advising on your coverage & exclusions, limits and structure, and assist in preparing meaningful information for any board requirements. 
  • Partnering with the Board, offering expert advice and guidance on any D&O insurance matters.
03

Taking Over the Process – Simpler, Quicker, Easier

  • Conducting insurer meetings on your behalf, if and when necessary.
  • Using automation to simplify and cut-down the process (for example, pre-filling information from existing or publicly available sources)
04

Keeping You Covered – Continuous Monitoring and Proactive Maintenance

We monitor your company’s activity on public platforms like ASX, ensuring any implications to policies are proactively considered and acted on.

05

Working for Your Best Interests

  • We prepare high-quality submissions on your behalf, advocating for comprehensive insurance.
  • We conduct in-depth comparisons on coverages, according to your specific requirements.
  • Negotiating on your behalf to get the right cover in place for when indemnity is needed.
Specialised expertise

Our Directors and Officers Insurance Team

Our team of industry specialists are here to help.

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Zakiyya Dessay

Account Executive

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Nick George

Director

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Travis Kenzle

Managing Director

CLIENT TESTIMONIALS

What Our Clients Say

We have been working with Travis, Nick and the team at KBI for a number of years

and have always been impressed with the quality of their service, their understanding of the market, and value they can offer our clients.

Dan Smith

Minerva Corporate

Came to the rescue when i was left in the lurch

by a previous insurance broker. Great level of service. Highly recommended.

Mitchell Walmsley, Director & Co-Owner

Affluence Chartered Accountants

Great team who care

about getting the best results for their clients.

Steve Jackson, Company Secretary

Anova Metals Limited

Professional, helpful and efficient.

KBI have provided our company with all our insurance needs for the past few years. During that time they have been exemplary in their approach. Highly recommended.

Storm Taylor, Office Manager

Discovery Capital Partners

The KBI Directors’ & Officers’ team are my go to insurance brokers for publicly traded companies that I am involved with. They are one of the few brokerages that passionately understand the junior public company space.

The explanation and comparison they provide makes it easy for our key executives to make an informed decision. I regularly recommend their services to other public companies in need of Directors’ & Officers’ insurance and other operational insurances.

Eddie King, Director

King Corporate

Having dealt with Nick and Travis for insurance needs for both small and medium-sized businesses it’s safe to say they know what they are doing and genuinely have their clients’ best interests at heart.

No matter how small an enquiry, Nick is always at the ready and has a solution back to you in no time. I’ve recommended them to others and have had the same feedback given to me in regards to their professionalism, availability to answer questions and the solutions they’ve provided.

Emma Kenton, Small Business Owner

Great Minds Group

Travis and this team have done a great job providing effective and supportive advice to our company over several years now.

Travis understands the value of service very well and we really appreciate it.

Anthony Kain, Executive Director

Peppermint Innovation Limited

Since being introduced to KBI, I have found their professionalism to be second to none in the industry.

I strongly recommend KBI as the insurance broker of choice regarding Commercial Property Insurance. They know the Commercial sector inside out and operate on a different level to any other broker I’ve worked with. When it comes to service, they always go above and beyond and ensure my clients are provided with the best available insurance options every year – 10/10.

Toby Bridges, Director

Lever Property Group

I’ve been working with the KBI team for four years and their service has been excellent.

They take the time to answer all my questions and give me great guidance when renewing my policies and making a claim. I would strongly recommend KBI.

Ryan Budge, Property Owner

Commercial Property

Reflecting on the past year, we extend our thanks for the unwavering support and exceptional services provided by KBI.

This year has presented its challenges, and having KBI by our side has made a significant difference. Your team’s dedication, support, and guidance have been invaluable, and we are truly grateful.

Genevieve Loving, Administration & Office Manager

ABBA Engineering

Directors & Officers Insurers

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