Directors & Officers Liability Insurance

What is Directors and Officers Liability Insurance?

The UAE business environment is dynamic and complex, which means company leaders are often exposed to liabilities and litigation. Such risks can put not only the business but also the personal finances of directors and managers at stake. This is where Directors and Officers Liability Insurance becomes essential.

This liability insurance policy protects directors, officers, board members, and even employees against legal suits arising from alleged wrongful acts committed in their professional roles. It covers legal defence costs, settlements, monetary damages, etc., resulting from shareholder, regulatory, or third-party claims.

If a company cannot indemnify its leaders, D&O insurance steps in to cover expenses directly; if the company does indemnify them, the policy reimburses those costs. In some cases, it even protects the company, making it easier to attract top talent and maintain investor confidence.

Who Needs Directors & Officers Insurance Coverage? 

Regardless of size and business operations, any private and publicly held company with a board of directors, advisory committee, secretariats, and other senior roles should take a directors and officers insurance policy in the UAE.

Furthermore, companies in the following areas should consider this policy:

• Public companies
• Financial institutions
• Non-profit organisations
• Mid-sized private companies
• Health & pharma companies
• Manufacturing companies
• Real estate and construction companies, and more

Why is D&O Liability Insurance Necessary?

Running a business and making key decisions is never easy, as directors and officers are the ones who make the tough calls, carrying responsibility and personal risks. No matter the size or nature of your company, D&O Liability Insurance is essential for businesses in the UAE.

They may be sued by stakeholders, such as shareholders, employees, creditors, customers, competitors, or regulators, for negligence, breach of duty, errors in judgment, or misuse of assets. These claims can result in heavy legal costs, settlements, and reputational damage.

D&O insurance coverage protects both the leadership team and the company. It covers defence costs, damages, and claims, while also safeguarding business continuity, attracting top talent, and building long-term trust with stakeholders. While not mandatory, any company with directors or a decision-making board can get significant benefits with this coverage.

Types of Directors and Officers Liability Insurance?

D&O insurance coverage is classified into three categories. Choosing the coverage largely depends on the company’s distinctive model, needs, history, and financial conditions. The following are the three coverage types -

Side A Coverage

It provides coverage for individual directors and officers when the company either denies or or cannot to indemnify them. In such cases, the policy protects the insured individuals, ensuring their personal assets are not at risk.

Side B Coverage

Unlike side A coverage, this coverage reimburses the company when it provides indemnification to its directors and officers. In this case, the company itself is insured, helping protect its corporate assets.

Side C Coverage

This coverage, also known as ‘Entity Coverage,’ protects the company itself. Here, the business is the insured party, and the coverage helps safeguard its corporate assets when they are at risk.

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

In the following situations, directors and officers can be sued and require D&O insurance coverage:

• Breaches of fiduciary duties owed to the company and shareholders
• Shareholder actions
• Reporting errors
• Derivative shareholder/investor claims
• Direct shareholder/investor claims
• Regulatory investigations/actions
• Inaccurate or inadequate disclosure
• Misrepresentation in a prospectus
• Failure to comply with regulations or laws
• Corporate manslaughter
• Creditor claims
• M&A litigation
• Competitor claims
• Employment practices and HR issues, and more

Directors and Officers Liability Insurance Add-Ons

Depending on your business type and risks involved, you can choose extensions or add-ons to get broader protection with a D&O insurance policy. Some of the common extensions are as follows:

• Worldwide coverage
• Global liberalization
• Passport master policy program
• Coverage for spousal, domestic partner & legal representative

✍️ These add-ons can vary from policy to policy, so check the available extensions while buying directors and officers liability insurance.

Why Should You Buy D&O Liability Insurance from Policybazaar.ae?

While there are several options to purchase Directors & Officers liability insurance in the UAE, Policybazaar.ae stands out as a leading choice. With this online platform, you can easily buy the right policy without any headaches. Here’s why:

⭐ Industry expert’s guidance

⭐ Top-rated business insurance plans

⭐ Dedicated relationship manager

⭐ Quick claim assistance

⭐ Competitive quotes

⭐ Transparent services

How to Buy the Right D&O Insurance Coverage in the UAE?

Here are the key tips that will guide you in buying the right directors and officers insurance policy in the UAE:

• Thorough Assessment - Before selecting a policy, carefully assess your business requirements and the risks involved. Consider the specialised area of your company, size, location, compliance, and more, then buy a plan.
• Coverage Scope - Analyse the key coverages of the policy, such as employment-related claims, third-party lawsuits, investigation costs, and more. Furthermore, pay more attention to the exclusions, as these may limit the benefits of the insurance policy.
• Compare Different Policies - This is one of the most crucial steps when buying a policy. Don’t just focus on comparing premiums. Rather, carefully evaluate features, benefits, add-on services, and overall coverage for every policy. Select a plan that aligns with your business needs and offers the best value, not just the lowest cost.
• Seek an Expert’s Advice - If you are unsure about which D&O insurance plan best suits your business, consult an expert such as Policybazaar.ae. Their guidance can help you compare options, select the right coverage, and safeguard your company and directors against potential lawsuits and claims.
• Quick Claim Process - Choose a reliable insurer with a proven track record and a strong claim settlement ratio. This ensures that in the event of a claim, you receive prompt support, smoother processing, and a higher likelihood of hassle-free settlement.

What Factors Affect the Cost of Directors & Officers Liability Insurance in UAE?

There are various factors on which the premium of Directors' and Liability insurance depends, and some of them are:

• Size of the company 
• Business revenue 
• Business activities
• Business location 
• Coverage duration 
• Claim history 
• Add-ons, and more

Directors & Officers Liability Insurance Claim Process

Mentioned below are the steps you need to follow to make a claim against directors' and officers' liability insurance in the UAE:

• In case of any lawsuit or claim, immediately inform the insurer or relationship manager to start the insurance claim process.
• Submit the claim form, along with some documents supporting your claim, such as the court's notice.
• The insurer will ask for some required or supporting documents, and in some cases, they may assign an investigator.
• Once the claim is settled, the insurance company will compensate or reimburse the cost up to the policy limit.

✍️In some cases, the insured must get the insurer’s written approval before admitting fault, settling a case, accepting a judgment, or paying legal costs. This helps the insurer manage the claim and keep coverage intact.

D&O Liability Insurance- FAQs

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