Directors & Officers (D&O) Liability Insurance

In Plain Terms

Directors and officers (D&O) liability insurance protects past, present and future corporate board members and managers from personal financial loss if sued for decisions made or wrongful acts committed by them while running a company. It covers legal defence costs, settlements, and financial judgments arising from alleged wrongful acts, mismanagement, employees disputes or breaches of duty.

01
Business Decision

The board or management acts in running the company.
02
Management Risk

The act is later alleged to be wrongful or negligent.
03
Claim

A shareholder, regulator, employee or creditor brings it.
04
Protection

Defence costs are advanced before settlement.

Key Coverages

Both listed and private companies, not-for-profit organisations, charity organisations and NGOs can buy D&O insurance.
For listed companies in Hong Kong, they will have to disclose in their annual reports whether they have purchased such kind of insurance.
Protects individual directors and officers when the company cannot pay or legally indemnify them.
Reimburses the company when it pays to defend or settle claims for its leaders.
Provides entity coverage to protect the listed company’s own balance sheet during securities litigation.
Provides advance payment of defence costs and expenses before settlement of the claim.

Who Can Claim Against You

Shareholders

Individual shareholders may bring personal lawsuits over financial losses or poor performance.
Regulatory authorities

Investigations, requests for attendance at hearings, and government inquiries.
Employees

Employment practices claims like wrongful termination, unfair dismissal, sexual harassment or unlawful discrimination.
Creditors, banks and liquidators

Especially when the company becomes insolvent or undergoes bankruptcy proceedings.
Competitors Claims

For defamation or misleading advertising used for unfair comparison or promotion.

Common Exclusions

Deliberate, intentional fraud or criminal acts.
Illegal personal profit or financial gain.
Bodily injury or property damage claims (covered by general liability instead).
Lawsuits between the company and its own directors (insured-versus-insured exclusion).