Directors' and Officers' insurance

Shared culpability is how the legal system views directors and officers of an organisation - even non-executive directors can be held liable for the actions of other directors. Which means you could end up fighting a court battle over something your colleague did, even if you didn’t know they were doing it.

One for all and all for one. Or 'jointly and severally liable', to use the legal term.
 

The last few years have seen a rise in claims on directors’ and officers’ policies, due to Hong Kong's changing regulatory environment 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. D&O protects you from claims made against you or your co-directors within the scope of your everyday business. It is there to cover you for legal costs as well as any damages. 

What does good D&O insurance look like? What to look out for:

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. 

• Damages and claimant’s costs
• Legal costs for successful defence against allegations
• Representation at official investigations and inquiries
• Entity cover for employment practices liability claims
• Allegations made by fellow directors, officers, or employees
• Retired directors

Coverage extensions:

• Libel and slander
• Intellectual property
• Pollution
• Joint venture liability
• Outside directorships
• Occupational Health and Safety defence costs
  
   

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.