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Directors’ and Officers’ Liability Insurance

Whenever senior management or a Board member makes a mistake or fails to complete their duties, they may be held personally liable. The Directors’ and Officers’ Liability Insurance provides coverage against these types of situations.

Directors’ and Officers’ Liability Insurance is an insurance policy that protects Board members and senior management. Directors and Board members may be held personally liable for any mistakes caused by negligence. 

Directors and Board members may even be held personally liable for any loss or damage they cause. In such cases, the Directors’ and Officers’ Liability Insurance covers the costs related to the process.

What does the Directors’ and Officers’ Liability Insurance cover?

In most cases, the Directors’ and Officers’ Liability Insurance is applied to cover the legal expenses related to the investigation of the liability for loss or damage. However, there is a wide range of insurance policies available.

The most common solutions only cover the expenses when the legal process has ended or do not provide coverage against the expenses of official investigations, for example.

We always recommend the most extensive type of Directors’ and Officers’ Liability Insurance to our clients in order to allow the directors and Board members to focus on their duties with peace of mind. 

Details are important in liability insurance policies

There are a lot of details related to the Directors’ and Officers’ Liability Insurance that should be studied carefully before taking out a policy.

These include, for example:

  • does the policy cover the costs of legal defence related to environmental damage
  • is the policy valid only in Finland or abroad as well
  • does the policy cover PR and crisis management expenses
  • are subsidiaries and their respective managements included in the policy
  • how the policy applies to retired or former directors.

How do companies benefit from the Directors’ and Officers’ Liability Insurance?

The Directors’ and Officers’ Liability Insurance is always taken out by the company on the behalf of an individual. The insurance can be seen as a fringe benefit related to management-level agreements.

Extensive Directors’ and Officers’ Liability Insurance shows the management that they are important to the company. This is a benefit valued by the best directors and officers.

The management’s mistakes or negligence can affect the company, shareholders or third parties, such as creditors. The claims may be statutory, contractual or even based on criminal liability.

The number of claims for compensation has grown in the past years, and an increasing variety of parties are presenting such claims. Legal processes are typically long and expensive regardless of whether negligence has really occurred or not. The Directors’ and Officers’ Liability Insurance ensures that you have access to the best help and support available in difficult situations.

A broker can negotiate better coverage

As an insurance broker, we have negotiated a very extensive insurance policy for our clients. Compared with a regular Directors’ and Officers’ Liability Insurance policy, many of the details in the policy we recommend are more comprehensive and better considered. 

It may be surprising to many that more extensive insurance coverage is not necessarily any more expensive than a regular policy. By taking out a policy through a broker, you can take advantage of the broker’s purchasing volumes.

We have a far superior negotiating position compared with individual clients due to the fact that we take out insurance policies for several clients.

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