Directors and Officers (D&O) insurance is a type of liability insurance designed to protect directors and officers of a company from personal financial losses and legal liabilities that may arise from their roles and responsibilities in the company.
Why do you need D&O Insurance?
Who would benefit?
D&O insurance is important for various types of organizations and individuals holding positions of leadership and decision-making authority
Directors and Officers (Individuals serving as directors, officers, executives or managers of companies / organizations)
Startups and emerging companies
Professional associations and trade organizations
Coverage is typically issued via three insuring agreements: Side A, Side B, and Side C:
It is important to distinguish the two types of D&O coverage that exist within the standard D&O insurance marketplace:
Public Company D&O Liability insurance
Geared specifically towards companies that issue their equity and/or debt securities and therefore primarily provides protection against class actions shareholder lawsuits.
Private Company D&O Liability insurance
Geared toward companies that are not participating in any sort of securities offering, but still seek protection for the owners, board members, executives and managers against claims filed by regulators, customers, vendors, competitors, partners or shareholders.
What is Covered?
Claims alleging wrongful acts committed by the individuals in their capacity as a Director of Officer
Defense and investigation costs incurred to respond to a claim
Damages/awards where the insured is found liable
Costs incurred to respond to administrative or regulatory proceedings
Pre-claim coverage for regulatory inquiries and/or requests for production of documentation
Punitive or exemplary damages where insurable by law.
Who is covered?
Past, present, and future directors, Non-executive directors, Employees in a managerial or supervisory capacity; potential for expansion to include all employees.
What is Excluded?
(examples of exclusions – not meant to be exhaustive)
Claims arising from the actual or attempted purchase or sale, offer or solicitation of any publicly traded securities
Claims arising from wilful or intentional wrongdoing by a company’s directors and officers
Claims arising from dishonest, criminal or fraudulent conduct
Claims relating to personal profit or advantage to which the insured was not legal entitled
Claims for voluntarily undertaken liabilities
Claims related to legal action already taken when the policy begins
Claims related to bodily injury or property damage
Claims related to the rendering of failure to render professional services (narrowly worded)
What is the Relm Solution?
Historically, D&O underwriting has been binary: you are either offering securities or you are not:
If you are not
Your coverage is conveyed to you via a private company D&O policy which provides a broad scope of protection but excludes coverage for securities claims.
If you are offering securities
Your coverage is conveyed to you via a public company D&O policy which significantly restricts the scope of protection, but does provide coverage for securities claims (or does it? – see below).
However, innovative entrepreneurs operating in the coin/token offering landscape are in a Catch 22 – they need to protect their personal assets while at the same time attract experienced directors, seasoned advisors and willing guarantors – but are challenged to do so in the absence of meaningful D&O coverage.
Meanwhile, the private company D&O form with its securities exclusion renders its coverage virtually meaningless. And the few insurers that are issuing D&O coverage to digital offerings on a public company form typically include a restriction on the definition of securities to exclude coin or token offerings. Combined with a regulatory claim exclusion and bankruptcy exclusions, this too renders D&O coverage via public company form virtually meaningless.
To address these problems, we have developed a proprietary policy wording that combines characteristics of both a private company and public company D&O policy so that you can obtain meaningful protection for the individual directors and officers as well as protection for the company against exposures arising from the offering of traditional securities, ICO, STOs, and other token based means of fundraising.
Your business is complex - securing a long term insurance partner shouldn't be.