Janardhan NDo you also follow this misconception?
Too many directors and officers still believe that liability insurance is only for large, publicly traded companies with numerous shareholders.
In India’s thriving startup ecosystem, which comprises over 1.59 lakh companies, board members face legal challenges daily – from unpaid vendor claims to wrongful termination suits and accusations of mismanagement when finances go wrong.
The global D&O liability insurance market reached USD 27.70 billion in 2024 and is projected to surpass USD 84.92 billion by 2025.
And yet, countless organisations, especially small and midsize companies, remain dangerously exposed.
In this blog, we’ll break down exactly what D&O insurance covers, what it doesn’t, and why knowing these inclusions could be the difference between business continuity and personal financial ruin.
Mitigata – Trusted Partner for D&O Insurance
When it comes to directors and officers liability coverage, having the right partner makes all the difference.
Mitigata has built a reputation by doing something simple yet powerful: matching businesses with insurance solutions that actually fit their needs.
Working with leading insurers like HDFC ERGO, ICICI Lombard, and Kotak Zurich, Mitigata brings together competitive pricing and comprehensive coverage options under one roof.
But what really sets us apart isn’t just our insurance partnerships – it’s our approach that has given us 100% retention rate.
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We compare quotes, handle paperwork, and provide fast claim settlements when you need it the most.
What makes 800+ businesses trust Mitigata?
- Smart pricing: You receive market-competitive rates while ensuring that your coverage gaps are adequately addressed.
- Precision Matching: Instead of one-size-fits-all solutions, we take the time to understand your unique business risks and industry-specific challenges.
- Simplified experience: From initial quotations to final documentation, the complicated insurance process becomes quite simple.
- 24/7 Support: Our claims support is meant to function efficiently during those key times when you need it most.
- Always-on expertise: Round-the-clock Support means you’ll never have to navigate insurance questions alone.
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What is D&O insurance coverage?
Directors and Officers (D&O) liability insurance is intended to protect the company’s decision-makers in the event of a mistake or error. It provides financial protection to directors and officials who are personally sued for alleged wrongdoing while serving in their roles.
Wrongful acts can include mismanagement, errors in judgment, failure to follow regulations, or breaches of duty.
In summary, this coverage assures that if a lawsuit is filed, the legal fees, settlements, and damages are covered by the insurance rather than being deducted from the individual’s own assets.
For example,
- Investors may sue a startup CEO for intentionally misrepresenting the company’s financial performance.
- A complaint is filed against a board member claiming wrongful termination by a former employee.
- A CFO is accused of not complying with regulatory reporting requirements.
These situations are more common than people realise. Securities litigation filings increased to 222 in 2024 from 215 in 2023, demonstrating that legal challenges to executives are not declining despite improved market conditions.
Further concerning is the trend toward larger settlements and aggressive class action filings, which means that when claims do occur, they are more financially damaging than ever before.
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What does D&O insurance typically cover?
Directors & officers liability insurance coverage provides a wide range of protection, but it’s important to understand what’s actually included. Here’s what you can generally expect to be covered:
Legal Expenses and Damages
If directors or officers are personally sued, the policy covers their legal defence costs and any damages or settlements.
Example: A supplier sues the company and also names individual board members in the lawsuit. The D&O policy covers the directors’ legal representation costs.
Management Decisions and Wrongful Acts
Any claims that arise from decisions made while running the company, whether right or wrong, are typically covered.
Example: A director approves a business acquisition that later fails, and shareholders accuse the board of negligence.
Employment Practices Liability
This covers cases brought by employees alleging wrongful termination, discrimination, or harassment.
For example, a former employee sues the HR head and the CEO, claiming unfair dismissal.
Securities Litigation (Public Companies)
D&O policies for publicly traded corporations frequently contain coverage for lawsuits arising from securities violations, such as financial statement misrepresentation.
For example, shareholders bring a class-action lawsuit alleging that financial statements were inaccurate prior to an IPO.
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What is not covered by D&O insurance?
Exclusions apply to D&O insurance, just as they do to any other insurance policy. Knowing what isn’t covered is equally vital as knowing what is.
Fraudulent or Criminal Acts
If a director commits deliberate fraud, embezzlement, or other illegal activities, insurance won’t apply.
Example: A CFO knowingly manipulating accounts to hide losses will not be covered.
Prior and Pending Litigation
Any lawsuits or claims that started before the policy took effect will not be covered.
Example: If litigation was already underway before purchasing the D&O policy, it will not be covered.
Personal Profit or Advantage
If a director gains a benefit they weren’t legally entitled to, the insurer won’t cover resulting claims.
Example: If a director who secures a personal kickback from a vendor contract, will be excluded.
Other Common Exclusions
- Bodily injury and property damage: These are typically covered by general liability insurance instead
- Professional services: Covered by professional liability insurance (errors and omissions)
- Contractual liability: Obligations arising purely from contracts
- Pollution: Environmental claims usually require specialised coverage
- ERISA violations: Employee benefit plan issues often need separate fiduciary liability coverage
A Claim Shouldn’t Cost You Your Long-Built Credibility
Mitigata keeps your business moving with comprehensive coverage backed by India’s most trusted insurers.
How to Choose the Right D&O Policy
Finding the right Directors and Officers insurance coverage isn’t about the cheapest premium. It’s about securing coverage that truly protects when a crisis strikes. Here’s your strategic approach to making the right choice.
Assess Your Unique Risk Profile
Every business faces different exposures. The risks associated with a tech startup differ vastly from those of a manufacturing company or a family business.
Consider your industry’s litigation patterns, growth stage, recent major decisions, and upcoming changes like IPOs. Public companies face securities risks that private companies don’t, while private firms often have greater employment liability exposure.
Understand Modern Coverage Essentials
Look beyond basic protection. Today’s D&O policies should cover cyber-related director liability, ESG litigation, and regulatory investigations. Employment practices coverage might be critical if you’ve faced workplace issues.
Ensure coverage extends to government investigations and crisis management expenses that arise before formal lawsuits begin.
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Right-Size Your Protection
Coverage limits should reflect realistic exposure, not just budget comfort. Private companies typically need 1-3 times annual revenue in coverage, while public companies require significantly more.
Consider potential class-action exposure and typical industry settlement ranges. Defence costs alone often reach seven figures before settlement discussions start.
Consider Key Enhancements
Standard policies often need customisation for complete protection. Evaluate coverage for retired directors, international subsidiaries, and Side-A DIC protection for when primary limits are exhausted. These additions often prove crucial during complex claims scenarios.
Choose Your Insurer Wisely
Beyond comparing premiums, evaluate insurers’ claims-paying history, experience with similar cases, and reputation for collaborative claims handling. Financial strength ratings matter as you need confidence in their ability to pay future claims.
Why Mitigata?
At Mitigata, we simplify this process. Instead of sitting through multiple sales decks and sifting through fine print, we analyse your company’s needs, compare policies across insurers, and bring you the best-fit D&O coverage. Our goal is to save you time while ensuring your leadership team is fully protected.
What really drives the cost of D&O insurance?
Conclusion
In today’s business world, corporate leadership comes with unprecedented personal liability exposure. What was once considered supplementary protection has become absolutely essential – D&O insurance now stands as the cornerstone of executive risk management strategy.
At Mitigata, we specialise in helping businesses navigate complexity and obtain coverage tailored to their specific risks.
Get in touch today and let us find the D&O insurance coverage that protects what matters most.
akshit k