Questions and answers
What documents are required for policy cost calculation?
Company financial statement and filled-in insurance application. The insurer may also request additional documents (audit report, registration forms and statements, etc.) to decide on the tariff and insurance policy conclusion possibility
What is the policy validity period?
Usually a D&O policy is valid for 1 year
Period of coverage?
The policy covers all claims stated within its validity period. However, if the claims are stated for the decisions, made prior to the policy validity period start, then it shall be regarded as the insured event as well. This is a claims made policy. Thus, an Insured event shall be regarded as occurred only when the corresponding claim was made, even if the events that gave rise to the claim had happened before. In order to identify the “reference point”, from which the events are covered, and being the source of claims, the policy shall have a retroactive date. As a rule, the date of the initial D&O policy conclusion acts as a retroactive date. This “reference point” remains intact in case of the policy prolongation to ensure continuity of the insurance coverage
What is regarded as an Insured event under D&O?
A wrongful act / management decision that led to expenses
Who is covered?
The policy usually covers all managers and directors, inclusive of the former and future ones, as well as the heads of the subsidiaries
What is the limit of cover?
Coverage identifying the maximum insurance indemnity shall be agreed by the parties, and depends on the profile, requirements and financial means of the client and might vary from dozens to millions of US Dollars. All risks hereunder are reinsured in the top European reinsurance companies
What about deductible?
The deductible is set under certain types of coverage – most often under losses dealing with bonds, and is applicable to indemnity of damages of the company itself. The deductible amount and its application is stipulated by the individual contractual conditions, as well as its presence is required by large insured amounts and reinsurance. The deductible is not applicable to coverage expenses and directors' protection from direct risks
What factors have the highest impact on the insurance premium amount?
- Company assets
- Any business activities on the US territory
What companies cannot be D&О-covered?
Companies with the key risk being professional liability, e.g. legal. US-registered companies cannot be insured as well
What could be the reasons for a company to get refusal for indemnity payment?
Insurance coverage is provided for any claims with any causes, exclusive of the ones that are evidently excluded. The wording for the exclusions is one of the key issues to be covered at contractual phase.
- exclusion of active claims;
- exclusion of claims from major shareholders;
- exclusion of claims due to the use of insider.
- exclusion of claims, laid due to the publishing of incorrect financial reporting by the Insured$
- exclusion of claims, dealing with bankruptcy or insolvency of a company;
- exclusion of claims, dealing with ‘unfair’ or deliberate actions of the director.