Posted on: December 15, 2022

If a D&O Claim Was Made Against Your Business, What’s Next?

Directors’ and officers’ liability (D&O) insurance is a robust way of bolstering your risk management. It will help to cover the costs and damages of defending wrongful action allegations and lawsuits. Selecting this policy means your business has opted for a level of coverage that may include the business owner, executives and leaders. Usually, it will cover you for past, current and future directors (including those acting in those roles) of your company and its subsidiaries.

According to the professional consultancy firm, Deloitte, there’s a growing interest in such insurance from small and medium-sized enterprises. Currently, about a quarter of them have it, with more SMEs in education, professional services and media sectors planning to secure it within the next three years.

What types of claims can be made against you?

These claims could be made under a D&O policy:

  • Against business leaders for the actual or alleged wrongdoing while managing a company
  • Failure to have a safe and secure workplace relating to poor employment and human resources practices
  • Not complying with regulations and laws
  • For losses or bankruptcy due to mismanagement, operational failures or breach of fiduciary duty
  • Poor or a lack of corporate governance
  • Making decisions without the required authority
  • Your company or stock’s underperformance
  • Poor practices leading to cyber security issues and data breaches.

Here’s who can lodge such claims:

  • Supervising board
  • Employees and third parties such as
  • Regulators, unions, state authorities
  • Competitors, customers, suppliers
  • Creditors, banks, investors
  • Liquidators
  • Shareholders.

Step 1: Notify us

Let us know as soon as you are made aware of circumstances that could lead to legal proceedings or claim, or that one has been lodged. This triggers your policy on a claims-made or reported basis.

Tell us the identity of the potential claimant(s). This offers your business some protection should an insurer try to use the policy exclusion for not disclosing “prior known circumstances”, according to the Australian Institute of Company Directors.

Step 2: The insurer will ask for more information

Once you’ve notified us, we’ll promptly notify the insurer. Then they will ask for clarification about the facts surrounding the claim. As a policyholder, you have a duty to cooperate to help the insurer investigate the claim.

Step 3: Determining the deductible

We’ll work with you to determine the deductible, also known as an excess, under your policy terms and conditions.

This exercise happens where the director or officer is subject to a writ, official notice or demand for compensation.

Step 4: Advancement of defence costs

Ideally, your D&O policy will not have a sub-limit for defence costs, and it should allow for those costs to be automatically advanced when we notify a claim. That advance should cover you until that insurer rejects the claim, including if it concerns alleged misconduct yet to be admitted or proven.

Securing your defence costs in advance means you won’t be out of pocket until the insurer reimburses your company for those costs.


While D&O insurance offers a layer of risk protection for your business, directors and officers are in a more challenging position these days, according to Governance Directions. It points to a significant shift in what’s considered prudent and balanced governance.

Aim to manage in line with community expectations and the circumstances and economic environment in which you operate. Meanwhile, we’ll be here as your guide and support for maintaining a strong risk profile, and to help with claim processing.

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