MANAGEMENT LIABILITY – D&O , EPLI AND PROSPECTUS LIABILITY
DIRECTORS AND OFFICERS (D&O)
Managers and Directors are either making or endorsing key decisions for the company. It makes them vulnerable to lawsuits from various stakeholders like regulators, shareholders, customers, competitors, employees and government bodies for decisions which went wrong. Lawsuits for sexual harassment or employee layoff, shareholder claims or financial irregularity investigations are known to cripple personal finances. The regulatory environment facing the directors of companies today is rigorous, and their responsibilities onerous.
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Side A and Personal Cover
Side A provides, Directors and Officers, an individual protection cover for defence or investigation costs or any liability. They are covered for all wrongful acts except intentional, fraudulent or those committed with a motive to profit.
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Reimbursement Cover
Many companies have an internal policy to defend its Directors and Officers in case of a claim. If you have a similar policy, you need to purchase a Side B cover to reimburse the expenses you incur in defending your Directors and Officers.
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Entity Protection
One can also buy a SIDE C to protect the company for claims made by Employees or Shareholders. Employees can bring class action suits and shareholders can sue publicly listed companies for erosion of their equity value.
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Who is covered
While all insurers cover the Directors and Officers, some may cover all employees and even their spouses as a broader cover. There is also protection for Retired and resigned employees for a significant period after they have left the company.
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What costs are covered
While all policies pay for cost of defence and settlements awarded by a court, D&O policies are designed to pay for many expenses like cost of investigations, bail expenses, Public relations costs and many more. Ask us for the best cover.
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Are Penalties covered
All policies have a cover for fines and penalties, “if insurable by law”. Indian law is yet to create a provision for such payment. It covers the risk from legal suits and does not pay your due taxes, deferred rent or defaulted loan payments.
EMPLOYEE PRACTICES LIABILITY
Every country has a different Employee practices regulation. Companies with operations in USA, Canada, Western Europe and other regions may be exposed to several Employee Protection laws which are aimed at eliminating discrimination and providing equal opportunity to all employees. Such countries have severe compensation requirements to affected employees including back and forward pays. A specialised Employees Liability Insurance is an effective cover to have the protection you need in there territories.
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Who is an Employee
In most countries a past employee or a future employee, potential job applicants or temporary staff can all be treated at par with an employee. When an claim is made for employment practices your EPLI should cover them all.
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Third party Cover
Your exposure is not limited to employee claims. A vendor, a visitor or a customer may also become subject of racial, gender or sexual discrimination or harassment. EPLI policies should be designed to protect from such claims also.
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Wider Scope than D&O
It provides cover for inaccurate job references, front pay, back pay and all employment related tort. The violations may include those of Equal pay Act, Equal Opportunities Commission or any similar Employment rights.
PUBLIC OFFERING INSURANCE (PROSPECTUS LIABILITY)
Raising of capital through an IPO or secondary offering can be fraught with risks. There can be allegations of the public offering documents having misleading and incorrect statements, mismanagement or that the sale and offering was done wrongfully. With increasing awareness and regulations for investor protection, investors and regulators can bring Civil and criminal liabilities for financial losses and breach of law. Claims can be made even when plans and projections of the Prospectus are not met. Edify can put together a Prospectus liability which dovetails into the Directors and Officers cover for a comprehensive risk cover.
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Who are at Risk
Investors can claim against the Company, its Directors and Officers. This can include selling or controlling shareholders, Future Directors, underwriters, advisors, vendor or even individuals making offering statements in roadshows.
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Broad Coverage
Cover can extend for several years ensuring no premium changes or cover cancellation. Coverage persists even if management of the company changes. It covers investigations, regulatory events, settlements, public relation and defence costs.
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Why not include in a D&O
Such inclusions expose the liability if a D&O limit is exhausted due to a large claim. Annual renewals risks rise of premiums, non-renewal or cancellation. One can neither allocate the premium to offering cost nor include additional insured in the policy.
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