As insurance brokers we feel it is important to understand exactly what Directors and Officers (D&O) Liability insurance is. D&O Liability insurance offers protection for claims brought against Directors, Officers and senior employees for actual or alleged breach of duty, neglect, misstatements, errors or omissions.
The insurance of management and liability risks was first brought about in the 19th century, in places such as Europe and America. Though not referred to as D&O Insurance, the offering resembled the cover that we know today. It was largely ignored and only began to be sold in the 1930s; but it has become more crucial than ever in recent years due to the implementation of the 2008 Companies Act. The act holds directors and officers more accountable than ever for any wrongful or negligent actions.
As a director you can be held personally responsible, that means that your personal assets are at stake as well. With this unchartered territory for D&Os in South Africa, no person should take on the position without the insurance in place.
Why is it necessary?
Directors and Officers, like every other human being, can make mistakes. The only thing that sets you apart is that you can be held personally liable for them. As you constantly have to make tough calls that can have a huge impact on the business and its employees you are constantly at risk.
Does D&O Insurance encourage bad behaviour?
D&O Insurance is not a blank check for Directors and Officers to behave badly. There is no evidence to support the claim that by having the policy in place, directors and officers have increasingly bad behaviour. In fact, the opposite is true; by being made aware of the risks involved they become more cautious and aware of what is at stake with each and every decision.
CC&A Insurance Brokers offers D&O Insurance as well as Professional Indemnity Insurance, which covers the legal expenses incurred in your defence as well as an Excess/Umbrella/Top Up option that covers any major incidents that could exhaust their primary insurance protection. Get in touch today for more information.
“The article should not be considered legal or financial advice and is for information purposes only. You should consult with a professional financial advisor to determine what may be best for your individual needs.”