D&O insurance for individuals

Personal protection for Directors and Officers

The last few years have seen a rise in claims on Directors’ and Officers’ policies, due to more stringent governance guidelines and increased oversight by regulators. There are plenty of insurers willing to take on this risk; the challenge is choosing the right one.   

What does Directors’ and Officers’ insurance cover?

Directors’ and officers’ (D&O) liability insurance gives financial protection in the event you are sued personally. Personal D&O protects you against claims made against you within the scope of your everyday business. It is there to cover you for legal costs as well as any damages. 

What does good personal D&O insurance look like?

D&O insurance is there to pay for costs relating to mounting a defence, and any damages or settlements relating to the matter. Any allegation made by a third party against a director or officer, no matter how frivolous, needs to be vigorously defended, otherwise there is a risk of judgement being entered in default of a defence. 

Other areas that give rise to claims include:

• Positions on outside boards 
• Wrongful termination, sexual harassment or discrimination 
• Initial public offerings 

Directors and officers can be held liable for their own actions and inactions – and the actions of their co-directors.  Directors’ personal liability for the performance of a company is unlimited. If the shareholders want to sue for mismanagement, they can, and do, quite frequently. 

Why do individual board members need their own D&O policy?

A member of an executive body – e.g. a member of the Management Board or Supervisory Board or a managing director – is personally and unlimitedly liable for their own misconduct with their own assets.

This liability also extends to the misconduct of other employees, in cases the board member is aware of or complicit in the misconduct. This is known as ‘organisational fault’.

Am I covered on the company’s D&O policy?

The company's D&O insurance contract offers good protection for individual directors.

However, individual board members are not a contractual partner of the company's D&O insurance contract, but only a beneficiary insured person. So in practice, the following uncertainties exist for the company managers in practice:

• The company and deductible D&O insurance does not cover the own contribution in case of a settlement
• No immediate access to the insurance policy
• Unclear knowledge of the exact scope of the insurance cover and possibly existing gaps in coverage
• Potential for exhaustion of the sum insured by other insured persons - e.g. in subsidiaries
• Exclusion from D&O insurance coverage
• Challenge of the D&O contract due to fraudulent misrepresentation by other insured persons.
   

Benefits of personal D&O cover

Our personal D&O insurance grants the policyholder individual insurance cover. As the policyholder, the company manager benefits from our personal advice, secures his own sum insured and enjoys the best insurance cover at all times - both as a supplement to and independent of the insurance cover of the company's D&O insurance contract.

Our personal D&O insurance offers insurance protection in the event of withdrawal from or contestation of the corporate D&O.  It also offers immediate access to your own D&O protection and personal advice in the event of a claim.

The policyholder has his own sum insured and coverage is also granted for any third-party mandates. In addition, our personal D&O insurance serves to cover the deductible from Section 93 (2) sentence 3 AktG.

In addition, the assumption of costs of deductibles in the context of comparisons is granted.