Directors and Officers Liability Insurance

What Does Directors and Officers Policy Cover? 

The Directors & Officers Insurance covers the following: 

• Wrong Decisions or Mistakes: The policy covers claims made against directors and officers for mistakes, wrong advice, or not doing their duty properly.
• Legal Expenses: It pays for lawyer fees and court costs if a director or officer is taken to court or investigated by a regulator.
• Settlements and Defence Costs: It covers money that must be paid as part of a settlement or court decision—up to the policy limit (but not for proven fraud).
• Regulatory or Shareholder Complaints: The policy covers actions taken by government bodies (like SEBI) or shareholders if they think the company was mismanaged.

What are the Add-Ons Under the Directors and Officers Insurance Policy?

Here are a few common coverages provided under the D&O policy:

• Emergency Costs: It covers immediate expenses incurred during unexpected crises, such as legal fees and crisis management costs.
• Crisis Response: This add-on includes support for managing and responding to crises effectively, safeguarding the company's reputation.
• Mitigation and Avoidance Services: It offers services to help prevent issues and mitigate potential risks.
• Assets and Liberty Costs: This add-on covers expenses related to protecting personal assets and liberty when directors or officers are sued personally.
• Kidnap Response: This add-on assists in responding to kidnapping incidents involving directors or officers.
• New Subsidiaries: When the company establishes a new branch, Directors and Officers Insurance extends coverage to these entities.
• Employment Practice Liability (EPLI): This extension covers claims related to employment practices, such as wrongful termination, discrimination, and harassment.
• Cyber Liability Extension: Crucial after the DPDP Act, 2023, which brings strict penalties for data breaches.
• Crime Coverage: Protects against employee fraud, which is often overlooked by startups and family-run firms.

Scope of Protection

A D&O policy doesn't just define what is covered, but also when it applies. This is especially important in India, where investigations and legal proceedings can take years or even arise after an executive's tenure. Coverage typically extends to:

• Past actions: Claims linked to decisions taken before the policy began, provided no one was already aware of them.
• Present actions: Decisions and responsibilities carried out during the active policy period.
• Future actions: Claims that may surface later, covered under the policy term or an extended reporting period (run-off cover).

What Does a Directors & Officers Policy Not Cover?

Here are a few common exclusions under D&O Liability Insurance Coverage: 

• Dishonest Acts: The policy typically does not cover intentionally dishonest or fraudulent actions by directors or officers.
• Fines and Penalties: The policy generally excludes fines and penalties imposed by regulatory bodies or authorities.
• Insured v Insured: Directors and Officers Insurance often excludes claims brought by one insured party against another within the same organisation.
• Bodily Injury/Property Damage: It usually excludes bodily injury, property damage, and pollution-related claims.
• Prior and Pending Litigations: Director and Officers Insurance does not cover claims and lawsuits filed before the policy's retroactive date.
• Proprietary Information, Trade Secrets, and Intellectual Property: The policy excludes claims related to the misuse or theft of proprietary information, trade secrets, or intellectual property.

Note: Exclusions under the D and O insurance vary from insurer to insurer. To learn about them in detail, refer to the policy wording provided by the insurance company. Additionally, exclusions under the D&O policy are subject to the terms and conditions mentioned in the policy wording/policy copy.

How to File a D&O Insurance Claim?

Here are the steps that you will have to follow to raise a claim under the D and O insurance policy:

1. Claim Intimation: Immediately inform your relationship manager about the incident.
2. Claim Form Submission: Submit the claim form along with relevant claim-related information, such as notices received from the court.
3. Claim Registration: Your relationship manager will forward the details to the insurance company to initiate the claim registration process.
4. Claim Progress: Following registration, the insurance company will provide a List of Requirements (LOR/Required Documents) and, if necessary, assign a Surveyor/Investigator. They will also share contact information for further communication.
5. Claim Settlement: Once the claim is resolved, either through settlement or court judgment, the insurance company will cover any agreed-upon settlements or judgments up to the policy limits.

Note: Please note that engaging with a lawyer or handling legal documents related to your claim requires prior approval from the insurance company. Deductions and processing will be carried out in accordance with the terms and conditions outlined in the policy.

Major Clauses Under Directors & Officers Insurance Policy 

The main clauses under the D&O policy are as follows:

Side A: Protection for Directors and Officers

Side A covers individual directors and officers if they're personally sued. It applies when the company can't provide legal protection or doesn't have the permit to do so. There's no cost-sharing, and it covers their assets.

Example of Side A Claim: Imagine Shweta, the CEO of a tech company, got accused of improper financial decisions harming stakeholders. The stakeholders personally sued Shweta for her actions.

However, the company's financial situation is shaky, and it can't afford to cover Shweta's legal expenses. In this situation, Side A insurance steps in to protect Shweta. It covers her legal costs entirely, ensuring her personal assets are safe.

Side B: Company Reimbursement

If the company pays legal expenses for its directors and officers who are personally sued, this policy reimburses those costs. It also reimburses if the company pays on behalf of an officer or director to a third party.

Example of Side B Claim: Rohan, a Chief Financial Officer (CFO), faces a lawsuit against him on the allegation of financial misconduct. To protect Rohan’s reputation and interests, the company pays his substantial legal fees during the lawsuit. 

Fortunately, the company chose the Side B clause while purchasing Directors and Officers Insurance. This policy reimburses the company for its legal expenses while defending Rohan. It also helped the company recover the costs it paid on Rohan’s behalf, reducing the financial burden on the organization.

Side C: Entity Securities Coverage

Protects the company when a claim is made directly against it for securities litigation claims. Insured individuals can claim against the company itself for wrongful acts in connection with the trading of its securities.

Example: A leading tech company specialising in software development faced securities litigation over allegations of misrepresentation and fraud in its securities trading. As legal costs rose, the company used Side C coverage from its directors and officers policy to file a claim. The policy covered defense costs, settlements, and judgments, easing the financial burden and maintaining stakeholder confidence.

Typical Premium Ranges for D&O Insurance in India (2025)

Here are the typical premium ranges for D&O Insurance in India on the basis of the company size and premium insured:

Note: Premium ranges are indicative and may vary by industry, risk profile, and insurer terms.

Is D&O Insurance Mandatory in India?

Currently, D&O insurance is not legally mandatory in India. However, listed companies are required by SEBI regulations to provide it for independent directors. Beyond this, many organizations, public, private, and startups, voluntarily purchase D&O coverage. With rising regulatory scrutiny, shareholder activism, and litigation, boards increasingly view it as a governance necessity rather than a compliance checkbox.

Why is D&O Insurance Required?

The Problem

Leading a company involves making critical decisions that carry significant risks. Directors and officers face constant pressure to steer the organisation toward success while navigating complex legal and regulatory landscapes. However, with this responsibility comes the potential for personal liability.

In today's litigious environment, officers and directors are increasingly vulnerable to lawsuits. These lawsuits often allege wrongful acts such as judgment errors, breach of trust, and negligence.

The Solution

To protect the interests of directors, officers, and the company itself, adopting robust risk management strategies is essential. One crucial aspect of this strategy is the adoption of D&O Insurance. This specialised policy provides financial protection against legal costs, settlements, and judgments from lawsuits against directors and officers.

By investing in Director Liability Insurance, companies demonstrate their commitment to protecting their leadership team and ensuring the continuity of operations.

What are the Common Causes for Lawsuits Against Directors and Officers?

The officers and directors of a company can be sued for:

• Breach of Duty 
• Fraud
• Misleading Statement 
• Employment Practices Issues
• Improper workplace conduct such as sexual harassment, failure to promote, etc
• Regulatory Violations
• Corporate Governance Issues
• Conflict of Interest 
• Negligence 
• Libel or Slander

Who is Covered under D&O Liability Insurance?

Here is a list of people who can get covered under the Director & Officers liability policy:

• Company Secretaries: The director and officer insurance includes professionals responsible for handling a company's legal and administrative matters, such as compliance with regulations and record-keeping.
• Legal Heirs: The policy extends coverage to the legal heirs of directors and officers. It protects them in case of legal claims or disputes.
• Directors: Directors who serve on a company's board are a key focus of D&O Insurance, as they often face personal liability for their decisions and actions.
• Employed Lawyers: This Liability Insurance extends coverage to in-house lawyers, safeguarding them as they provide legal counsel to the organisation.
• Estate Representatives: Representatives handling the affairs of deceased directors or officers can benefit from Officers on Duty Insurance coverage while managing any legal issues.
• Officers: Officers in managerial or supervisory positions within the company can be protected by insurance, protecting their assets.
• Spouses: In some cases, the spouses of these officers may also receive coverage, especially when they are involved in the company's affairs or hold positions.

Note: People eligible to get covered under the D&O Insurance policy vary from insurer to insurer. Therefore, talk to your insurance provider to learn about the people covered in detail.

Who can Take Action Against Directors and Officers?

Here is a list of people who can take action against the Directors and Officers of a company:

• Employees: Employees may file claims if they believe that the Board of Directors have engaged in actions that harm their rights. This may include situations such as workplace discrimination or labour law violations.
• Competitors: Competitors may sue directors and officers for alleged unfair business practices, antitrust violations, or actions that harm their market position.
• Suppliers: Suppliers can file claims if directors' or officers' decisions negatively impact contracts, agreements, or business relationships with them.
• Shareholders: Shareholders may take legal action against directors and officers if they believe their decisions have harmed the company's financial well-being or stock value.
• Customers: Customers can file claims for product defects, false advertising, or unfair business practices.
• Other Stakeholders: Other stakeholders, including community members, creditors, or business partners, may bring claims if they are adversely affected by the actions or decisions of directors and officers.

Why Buy a D&O Insurance Policy from Policybazaar for Business?

• 365-Day Claim Assistance: Our claim specialists are available 365 days a year to ensure smooth claim settlement.
• Dedicated Relationship Manager: Enjoy instant support from a dedicated relationship manager who meets your needs at every step.
• Swift Response with Multiple Modes of Communication: Expect quick responses via phone, email, or messages, ensuring efficient and accessible communication.
• Competitive Quotes: Leveraging our extensive network of insurer partnerships. We offer competitive quotes from top insurers, ensuring you get the most favourable rates without compromising service quality.

Directors and Officers Liability Insurance Faqs