Directors and Officers Liability Insurance, often called D&O and also known as Management Liability Insurance is liability insurance payable to the directors and officers of a company, or to the organization itself, to cover damages or defence costs in the event they suffer such losses as a result of a lawsuit for alleged wrongful acts as directors and officers of the insured entity.
Such coverage can extend to defence costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously.
Traditionally D&O insurance was only purchased by publicly listed companies however changes in legislation and an increasingly litigious society has rendered D&O Insurance crucial for all companies regardless of their size or sector. Directors and Officers now find themselves in a far more onerous position than ever before, with The New Companies Act, 2008 (Act No. 71 of 2008) holding them more accountable and even personally liable for breaches of their fiduciary duty.