What is it?
D&O insurances originated in the United States in the 1930s and have started to become popular in Germany in the late 1980s. The long form is “Directors and Officers liability insurance”, where the “D” stands for directors and the “O” for officers. It is an insurance that is directed at the upper level of management, which is why it is also often called a manager insurance.
One can think of the D&O insurance as a specialised, complementary form of professional liability insurances or to be more precise of financial loss liability insurances that a company takes out for its executives.
The background therefore is nearly identical to the regular financial loss liability insurances, it is intended to secure companies and their executives against high financial costs. Since executives carry more responsibilities and their decisions usually have greater consequences, this special form of liability insurance was created.
What are the benefits?
The general benefits of the D&O insurance are almost identical to those of a financial loss liability insurance, in particular you buy the following three coverages:
- The examination of whether the executive is liable.
- The defence against unjustified claims.
- The payment of justified claims.
As with most liability insurances, the damages cannot have been caused deliberately or grossly negligent or the insurance will not cover them.
The D&O insurance covers financial damages from both internal and external relationships.
This means that claims are covered by both the company itself against the executive (internal relationship) as well as claims of others such as customers, suppliers, business partners, etc. (external relationships).
In addition, the D&O insurance offers two special features that other financial losses liability insurances (usually) do not have:
- Backwards cover: The possible coverage of claims that arose BEFORE the contract period.
- Extended reporting period: The possible coverage of damages that are claimed AFTER the expiration of the contract.
Who is it for?
After a rather slow start in the late 1980s, the D&O insurance is now standard procedure for medium and large companies in Germany. But even smaller companies, especially in sectors such as consulting, IT or finance, have come to appreciate the benefits.
This is especially due to the fact that both sides benefit from them. The company is covered when an executive makes gross mistakes and the manager can be sure that his/her private assets remain intact.
Of course, a D&O insurance only makes sense at a certain company size and / or if the executive has personnel and / or asset responsibility.
Thus, the D&O insurance can almost always be recommended. Contact us and together we can determine if and to what extent a D&O insurance is suitable for you.