Key Factors to Consider When Choosing D&O Liability Insurance for Your UAE-based Business

Introduction:

Without proper backup, directors and officers risk their personal wealth and professional reputation as they face increasing scrutiny and liability in today’s litigious and regulated business environment. Directors and Officers (D&O) liability insurance is designed to protect leaders from personal and company property loss resulting from wrongful decisions or actions while managing the company.

In this blog, you will learn the key factors to consider while opting for D&O liability insurance. It highlights the advantages and limitations that the potential policyholder needs to be mindful of.

Key Factors To Consider While Choosing D&O Liability Insurance

 

1. Scope of Coverage

Before opting for insurance, especially when it deals with legal coverages and services, it is paramount to know the extent of its security. Enquire about the D&O liability insurance’ coverages and exclusions based on the size of the business.

Claims-Made vs. Occurrence Coverage:

Most of the potential policyholders are not aware of a crucial aspect of the insurance, which is claims-made and occurrence-based coverages. Claims-made is an insurance policy that the damages will be covered only if the claims are made within the policy period. On the contrary, occurrence coverage accepts claims that are made after the policy period for the damages incurred during the policy period.

 

Side A, B, and C Coverage:

Here are the three primary types of D&O liability coverage:

• Side A: Protects the personal assets of directors and officers when the company is unable to indemnify them.
• Side B: Covers the company’s indemnification obligations to reimburse directors and officers for defense costs and damages.
• Side C: Provides coverage for the company itself, particularly in cases involving securities litigation.

2. Types of Risks Covered

Management Decisions:

It is paramount that insurance covers any monetary and legal damages incurred due to wrongful acts, such as errors, omissions, or misstatements made in the course of decision-making.

Regulatory and Compliance Risks:

Ensure coverage extends to risks related to compliance with UAE regulations, including labour law violations, tax issues, and potential breaches of corporate governance standards. D&O liability insurance is not mandatory in the UAE. However, it is highly recommended for businesses, especially for those with a large management structure or publicly listed companies.

Employment Practices Liability:

As some insurers also include coverage for employment-related claims such as wrongful termination, discrimination, or harassment, it is advised for businesses to look out for such coverage in the policies.

3. Reputation Protection

Reputational protection is important in D&O liability insurance due to the high risk of legal consequences involved. Ensuring the extent of legal protection offered by D&O can mitigate businesses and their directors from affecting business continuity and career stability.

Some insurers suggest top attorneys in the field and offer media and public relations services to protect reputational ruins. At times, they offer mediation and arbitration services to prevent claims from reaching court. They arrange for a mediator to facilitate settlement negotiations and resolve disputes. This approach helps save time and protects the reputation of both the organization and its officials.

4. Exclusions and Limitations

While reviewing the policy, it is absolutely necessary to look out for exclusions and limitations of the insurance to evade any inconvenient shocks at the time of need.

Here are the common exclusions of D&O liability insurance:

• Fraudulent or Criminal Acts
• Personal Gain or Profit
• Bodily Injury or Property Damage
• Employment Practices Claims
• Pollution and Environmental Claims
• Securities Violations
• Prior Knowledge or Prior Acts
• Jurisdictional and Geographical Coverage

5. Premiums, Deductibles and Subscription Structure:

Premiums vary based on the risk involved, the size of the business, the number of decision-makers, and the claims history. It also varies considering the payment structure, like monthly, half-yearly or annual payments.

Therefore, it is paramount to plan the payment according to the amount and availability of funds to balance the budget of the business. Understand the deductible structure, as a higher deductible may reduce premiums but increase out-of-pocket expenses if a claim occurs.

CoverB: Your Trusted Advisory Platform in the UAE

CoverB’s advisory services to their customers’ finances, legal matters, reputation, and peace of mind has earned them the trust and loyalty of their clientele. Their transparency in claims handling, expertise in risk analysis and experienced customer consultation, mitigate decision-makers from all potential risks and damages.

Wrapping up:

It is crucial to safeguard the decision-makers and leaders of the organizations, as it is their peace of mind and confidence that pave the way for suitable and insightful choices on behalf of the organisations. Obtaining D&O liability insurance for decision-makers and leaders will boost their trust and productivity in the organisation.

Looking to retain talent and provide security for their personal risks? Connect with experts at CoverB today for tailored insurance service for all your needs!