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What is Directors and Officers Insurance?

Directors and officers insurance (D&O insurance) is designed to protect the directors and officers of a private and/or public company for alleged wrongful acts including claims of mismanagement, for example breach of fiduciary duties, of the company. These legal actions or investigations of wrongdoings are typically brought by shareholders, employees, regulators, creditors, competitors, liquidators and others. D&O Insurance can also be extended to cover the entity for security, employment practices liability and statutory liability to protect the balance sheet of the company.

What does Directors and Officers Insurance Cover?

D&O policies are typically structured with three available insuring clauses – Side A, B & C
Side A Coverage (Directors & Officers/Insured Persons)

Insurance protection for the Directors and Officers when indemnification is not available to the Directors and Officers of the company resulting in a personal liability risk – Its sole purpose is to protect the individual directors and their personal assets and is the final protection if the company is unable to indemnify the Directors & Officers itself.

Side B Coverage (Company Re-Imbursement)

Insurance protection for the Company when they indemnify a Director and/or Officer of the company, in the form of a reimbursement from the insurer. Side B is a form of balance sheet protection for the company and the transfer of the indemnity exposure that is agreed in the company’s deed of indemnity.

Side C Coverage (Entity Securities Liability)

Insurance protection for the entity’s own liability, specific to securities laws. It is balance sheet protection in the event the company is also named in a securities claim. Please note that many insurers are no longer offering side C coverage due to claims history over recent years in Australia.

Additional Coverage and Policy Options

Statutory Liability

Statutory Liability insurance is protection for the Directors & Officers and the company (when applicable) for a claim alleging a statutory breach. Some examples of the types of statutory investigations and claims are Workplace Health & Safety, Employment Practices Laws, Environmental Protection Authority, Spam and Privacy Laws. Statutory Liability is typically included for the Directors & Officers but not the entity on Directors’ & Officers’ policies. Statutory Liability is an option that can be added to most D&O policies for an additional cost or can be purchased as a standalone policy.

Employment Practices Liability

Employment Practices Liability (also known as EPL) insurance is protection for the Directors and Officers and the company (when applicable) for a claim alleging an Employment Practices Breach. Employment Practices Liability is an additional inclusion for the Directors and Officers but generally not for the entity. Examples of matters which fall under the category of EPL are wrongful dismissal, sexual harassment, discrimination, bullying, whistleblower actions. Entity Employment Practices Liability is an option that can be added to most Directors and Officers policies for an additional cost.

Excess Side A

As outlined above, Side A coverage is protection specifically for the Directors & Officers. Depending on how a D&O insurance program is structured, Directors & Officers may be left exposed due to sharing the limit with the company (Side C). An option to further protect the Directors & Officers is to purchase an Excess Side A limit or policy. Some Directors & Officers policies include a small additional limit of Side A in excess of the policy limit if the Side A limit is fully exhausted. There are also insurers that are now offering Excess Side A policies as a stand-alone policy to sit in excess of the master policy.

Prospectus Liability Insurance

Prospectus Liability Insurance is a type of coverage that can be purchased on a stand-alone basis to respond to claims alleging a breach of securities law in connection with a specific prospectus. For more information on Prospectus Liability, please see our blog post @ Prospectus Liability Insurance

Directors and Officers policies have a Change in Control provision that states that upon a Change in Control the policy will only respond to wrongful acts or conduct that has occurred prior to the effective date. To pick up the exposure post Change in Control date, the insured should purchase a Run-Off policy to cover the Directors and Officers exposure from that date forward. The Run-Off policy is usually purchased for 7 years to match the statute of limitations in Australia.

The D&O insurance market is becoming rapidly challenging.
Premiums and deductibles have been increasing, sometimes dramatically, and some insurers being more selective about who they insure.
Watch this short video from KBI’s D&O Account Manager, Dawn James, on what strategies you can do to mitigate the negative consequences and best prepare for your next renewal.

Directors and Officers Insurance Exclusions

Directors and Officers exclusions can be categorised into two types—Standard Exclusions that are built into the policy wording and Customised Exclusions that are endorsed onto the policy by insurers.

Customised Exclusions

Future Offering Exclusion

This exclusion states that any future offering of securities is excluded.  There can be amendments to this exclusion to include a threshold and jurisdiction limitation. This is important for the managers of the D&O insurance, as they must notify the broker/insurer to ensure future capital raisings are underwritten and can be covered.

Major Shareholder Exclusion

This exclusion has a threshold for major shareholders (i.e. 10/15/20%) and the policy will not cover a claim brought by a major shareholder against the Directors & Officers. This exclusion usually has a requirement that the major shareholder has a holding above a threshold together with a board position to trigger the exclusion.

Retroactive Date Exclusion

This excludes any wrongful act committed or alleged to have been committed prior to the inception of the policy. This is a way for insurers to exclude past acts and make the policy only forward looking.

Insolvency Exclusion

This exclusion removes any coverage for claims arising out of insolvency. This exclusion can typically be removed if the company shows they are in a good financial position and can internally fund the company’s operations for 12-18+ months.

Political Risks Exclusion

This excludes claims connected with nationalisation of a Company or any part of a Company’s business. It will also exclude the seizure, reversion, appropriation of a company’s assets by a governing body.

Failure to Maintain Insurance

This excludes any claim which alleges the mismanagement of the company’s insurance program.

Professional Services Exclusion

This exclusion removes coverage in connection to the performance of or failure to perform professional services.

Pollution/Environmental Exclusion

This excludes any claim or allegation due to pollution or environmental event.

Standard Exclusions

Personal Conduct Exclusion

This exclusion is part of every Directors and Officers policy and excludes dishonest or fraudulent acts committed by an insured. It can extend to exclude intentional violation or breach of law/regulation and unfair profit or gain to which an insured has no legal entitlement. It is worth noting that most policies defend the Directors & Officers until final adjudication and policies typically include severability clauses which isolate the Wrongful Act or conduct by one insured so that it is not imputed to other insureds.

Bodily Injury/Property Damage

The policy will not respond to a a claim for Bodily Injury & Property Damage claim as this exposure is typically covered by a Public Liability policy.  This exclusion usually has a write back (gives coverage back) for Defence Costs, Employment Related Wrongful Acts and Security Claims.

Prior & Pending Exclusion

Prior & Pending Exclusion excludes cover for any pending or prior litigation involving the Company that has begun before the Prior & Pending date of the policy.

Insured Versus Insured for USA Claims

There are many variations to this exclusion, but the main purpose is to exclude cover for dispute between insureds / the company and an insured in the USA.

Ready for a Quote?

Request a Directors and Officers Insurance Quote Now

Quote Requirements for Directors and Officers Insurance

Public Companies have most of their information available to the public, but we recommend the following for our quoting process:

Completed proposal form

Prospectus or information memorandum

Corporate Presentation / Business Plan to show a summary of where the company is at and where it is heading

Insurer meeting with key executives (sometimes press releases, financials and the proposals forms don’t tell the full story, in which case we recommend a meeting with the insurers, so they become more familiar with the company and key people)

Please complete this Proposal Form and return to our brokers below to arrange a Directors and Officers Insurance quote. (Download Here)

Why work with KBI?

The KBI team has placed Directors and Officers Liability Insurance for over 300 public companies in Australia, Asia and North America. We have also worked with dozens of private and not-for-profit organisations.Our offering is tailored specifically for purchasing and managing Directors and Officers Liability Insurance and includes the following services.

1. Assistance with the submission process

so the insurers have the necessary information to properly underwrite and quote.

2. Quote comparison

we help clients make an informed decision by comparing the quotes (including plain language) so clients know what they are buying

3. Limit analysis

we can assist clients with providing additional information to help decide what is an appropriate limit on their Directors and Officers Insurance

4. Insurer meetings

can improve the quoting process as insurers become more familiar with the company and the key executives

5. Updated information

we focus on Directors and Officers insurance so we continually provide updates to our clients and contacts through our D&O blog and newsletter

6. Claims management

is crucial for Directors and Officers policy holders. Our D&O team not only has experience managing small and large D&O Claims, but we are a unique make up of senior brokers, lawyers and past ASX advisors, giving us a robust understanding of the process

Directors and Officers Insurance Team

dawn james
Account Manager | D&O
travis kenzle kbi
Managing Director
nick george
tyler speers kbi
Account Manager

Directors and Officers Insurance Blogs

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Directors and Officers Insurance Testimonials

IXUP Limited

I first contacted KBI to seek their assistance in organising D&O insurance for our small-cap ASX listed company. They were supremely responsive, very informative (on what can be a complicated and difficult to compare product) and proposed a fit-for -purpose solution at great value. Their proposal was clear and coherent and gave me great confidence in tabling for Board review and approval. We will be moving all of our insurance management to KBI. Highly recommended.

David Bonham
Former CFO

Travis is expert at finding excellent insurance value solutions for his clients. He caters to small and medium-sized businesses who need responsive advice and service and are working within a budget. Particularly, if you're experiencing the big insurance company hard sell followed by unresponsive service and cookie-cutter products, I think you'll be pleasantly surprised by what Travis will do for you.

Rob Pilz
Chief Financial Officer

Riverside Resources Inc.

Travis does excellent work in designing insurance that fits diverse clients and diverse needs. We have used their insurance for three years and it has provided solid coverage.

John-Mark Staude
CEO & President

First Line Consultants, Ltd

Travis is my “go to” mining expert in the insurance industry. I have contacted Travis a number of times to provide quotes to public and private mining companies with coverage options ranging from straight D&O, through to a full suite of coverages including active mine and overseas kidnap coverage. Travis is well versed in risk management and has assisted in evaluating the coverage options, providing cost comparative analysis in simple terms that are tailored to the mining sector.

David WJ McAdam

R. Anderson & Associates Inc.

Travis and his group has been providing insurance to our junior mining companies for several years and he has provided us with outstanding service over that time. He is extremely knowledgeable in his field, is very personable and I would not hesitate to recommend him and his team for business or personal insurance needs.

Robert Anderson

Endeavour Silver

"Travis was always good at being straight up with answers and getting information for us and presenting it in a way that was clear and concise."

Godfrey Walton
President and Chief Operating Officer

King Corporate

"The KBI Directors' & Officers' team are my go to insurance brokers for publicly traded companies that I am involved with. They are one of the few brokerages that passionately understand the junior public company space. The explanation and comparison they provide makes it easy for our key executives to make an informed decision. I regularly recommend their services to other public companies in need of Directors' & Officers' insurance and other operational insurances."

Eddie King

Coastal Contacts

"In a world of increasing complexity and risk, Travis has a rare ability to distil decisions down to the factors which are most important and most relevant. Over the past 8 years of working closely with him, I have learned to trust his experience and instinct as it relates to a variety of insurance products. I enthusiastically endorse Travis and his work.

Nick Bozikis
Chief Financial Officer

HWL Ebsworth

"Through my many dealings with Travis and the KBI team, I have seen firsthand their high level of service and expertise. They have proven themselves to be leaders in the field of Directors’ & Officers’ Insurance and I regularly refer our publicly traded clients to them for advice and the appropriate insurances."

Bryn Hardcastle
Managing Director

Directors and Officers Insurers

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Level 18, 140 St. Georges Terrace, Perth, WA, 6000

Postal Address:

PO Box Z5102, St. Georges Terrace, Perth WA 6831

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