The cover provided by the policy is found in two Insuring Agreements and a number of extensions.
- Insuring Agreement A provides cover for the company’s directors, managers and supervisors should they become personally liable for a wrongful act such as mismanaging the company.
- Insuring Agreement B will reimburse the company for legal expenses that it has paid on behalf of the directors and officers
- The following is a brief summary of the extensions available on the policy
- Estates and legal representatives
If the Insured Person dies or is sequestrated then this policy will cover the estate as if it were the Insured Person.
- Spousal liability
This extension indemnifies the Insured Person’s spouse if they suffer loss as a result of being married to the Insured Person. Example: If two people are married in community of property, there is a risk that the spouse could also lose their assets when the Insured Person’s assets are seized by the sheriff.
- Discovery period
This extension allows a claim to be made in the 12 months after the Period of Insurance. The event causing the claim must have occurred on or after the Retroactive Date but before the end of the Period of Insurance.
- Retired Directors’ or Officers’ cover
If this policy lapses and is not replaced, the cover continues for 6 years for retired directors and officers, provided that the retirement occurred during the Period of Insurance. Retirement does not mean the Insured Person has reached retirement age, it simply means that they are no longer a director or officer of the insured company. This extension does not apply to directors that were disqualified from serving as a director.
- Corporate manslaughter
These claims arise out of allegations of gross negligence or breach of statutes in relation to health and safety. Corporate manslaughter is normally a corporate offence which does not affect individual directors and officers, however, individuals may subsequently be held liable as a result of the investigation’s findings.
This extension covers the Insured Person’s legal costs in defending themselves during a corporate manslaughter investigation. Should a charge of manslaughter be brought against the insured company it will, inevitably, involve individual directors and officers but because there is no actual charge brought against them personally the D&O policy in its standard form will not respond. This extension expands the cover to provide for costs they will incur in using legal counsel to advise them during the legal proceedings.
- Extradition costs
Covers the Insured Person's expenses in resisting an extradition application made by a foreign government
- General Counsel liability
Covers legal advisors in the Insured Company’s full time employ. Liability arising out of professional services is one of the policy’s exclusions. However, where the lawyer works exclusively for the Insured company, they are not excluded from this policy’s cover.
- Emergency Costs
Covers legal expenses incurred before it was possible to obtain the Insurers’ permission. Example: opposing an urgent matter over a weekend.
- Deprivation of Assets
The Insurers will pay some of the Insured Person's necessary living expenses for up to 12 months after the Insured Person’s assets have been seized.
- Public relations expenses
Pays the expenses of public relations consultants who mitigate negative publicity arising out of charges brought against the Insured Person
- Reputational protection expenses
Pays the expenses of public relations consultants to publicize the Insured Person’s ‘not guilty’ finding
- Pollution defence costs
Mostly this extension is included automatically with an indemnity limit of R250,000. This means that, despite the pollution exclusion, there is cover for liability arising out of pollution – but only for legal defence costs incurred in defending a pollution charge.
- Reinstatement of limit of indemnity
When the limit of indemnity is reduced by a claim, this extension will automatically reinstate it to the original amount. This process will continue until the policy has paid twice the original limit of indemnity. This extension does not increase the limit in respect of any one claim or series of claims arising out of a single wrongful act or related acts.
- VAT exclusive
A significant benefit of this policy is that the indemnity limit is VAT exclusive and VAT is paid over and above the indemnity limit.
- Non-executive directors protection
If a non-executive director are unaware of any dishonest practices in the company then their cover will not be affected by the dishonesty of other directors or officers.
- Special excess protection for directors
This extension provides additional legal defence costs when the policy’s indemnity limit has been reached and Insured Company is insolvent or is legally prohibited from paying the Insured Person’s legal defence costs
- Tax, COID and UIF extension
This extension covers an Insured Person if they become personally liable for the Insured company’s unpaid taxes. It would only apply if that Insured Person did not intentionally commit any wrongdoing and if the company is insolvent.
- Injury and Damage defence costs
Normally the Insured’s public liability policy would cover employees for their liability arising out of the Injury or Damage they cause in the course of their employment duties. That cover would therefore be excluded from this policy.
Where the Insured company has purchased, and paid the premium, for a general liability policy and that policy failed to pay a legitimate claim, then this extension would cover the Insured Person’s legal defence costs if the Insured company was unable to pay them.
- Fines and penalties extension
This extension provides limited cover for certain fines and penalties provided that such cover is not contrary to public interest