D&O insurance stands for “Directors & Officers” and is actually called “Directors’ and Officers’ Liability Insurance”. Governing bodies’ members and executives have a direct personal responsibility and liability towards various stakeholders, such as their company, shareholders and other third parties.
If financial loss is caused by a breach of this responsibility, they are personally liable for damages (“manager liability”). Aggravations of liability due to additional legal and regulatory requirements in connection with an increasingly aggressive claim mentality lead to several hundred lawsuits being filed against executives every year in Switzerland; these are civil law claims that are often associated with criminal law investigations. The majority of manager liability lawsuits are settled out of court, court decisions are only in the mid double-digit range per year.
The D&O insurance is a company policy; it is purchased by the company and is available to its governing bodies (board of directors, management and executives) in the event of a claim and offers insurance cover for financial losses. In the case of unjustified claims, the D&O covers the defense costs (e.g. lawyer and court costs) as well as the loss itself as far as justified or when the dispute is settled within the scope of a settlement.
Today, D&O insurance is part of the basic insurance portfolio – there are very few larger companies in Switzerland that do not purchase such cover and in the SME segment, too, we are seeing an increasingly comprehensive coverage across all sizes and sectors.