What D&O is

Directors and Officers Liability insurance protects the personal assets of executives when claims are brought against them for losses that, in the claimant's view, were caused by their management decisions: errors, exceeding authority, failure to perform duties.

The policyholder is usually the company itself, and the insured persons are individuals: the sole executive body (CEO), members of the board of directors and management board, and sometimes the CFO, chief accountant and other managers with decision-making power.

Why the risk is real in Russia

Russian law expressly provides for the personal liability of executives:

  • Article 53.1 of the Civil Code — a person authorised to act on behalf of a legal entity, members of its collegial bodies and persons who determine its actions must compensate losses caused through their fault.
  • The Law on Joint-Stock Companies (208-FZ) and the Law on Limited Liability Companies (14-FZ) establish the liability of board members and executive bodies to the company and the procedure for claims brought by shareholders or participants.
  • The Insolvency (Bankruptcy) Law (127-FZ) provides for the subsidiary liability of persons controlling the debtor and for recovery of losses from them at the request of the insolvency practitioner and creditors.

Claims against directors may be brought by shareholders and participants, the company itself (including after a change of management), the bankruptcy trustee and creditors, counterparties and state authorities.

The Corporate Governance Code recommended by the Bank of Russia provides for the company to insure the liability of board members. For public companies, D&O is common practice.

Structure of cover

  • Side A — the company cannot or may not indemnify the director (for example, due to bankruptcy), and the insurer pays the insured person directly.
  • Side B — the company has indemnified the director for losses or defence costs, and the insurer reimburses the company.
  • Side C — the company's own liability for securities claims; usually relevant for issuers.

An important part of the policy is defence costs: lawyers, expert reports and court costs, often advanced before any court ruling. Costs of representation in investigations, bail and reputation restoration are also often covered under sub-limits.

Typical exclusions

  • wilful unlawful acts and fraud established by a court;
  • gaining an illegal personal benefit;
  • fines, penalties and taxes, unless expressly provided otherwise and not contrary to law;
  • bodily injury and property damage (the domain of general liability);
  • circumstances known before the policy started;
  • "insured versus insured" claims — with carve-backs that differ between policies.

Claims made and the retroactive date

D&O is almost always written on a claims-made basis: claims made during the policy period for acts committed after the retroactive date are covered. The date must be kept on renewal and when switching insurers. When a company is sold or the policy ends, discuss a run-off (extended discovery) period — several years during which former executives remain protected.

What drives the price

  • Industry and size of the company, revenue, assets, debt load.
  • Financial position: signs of insolvency sharply increase the risk.
  • Public status: listed shares and bonds, number of shareholders.
  • Quality of corporate governance, internal control and audit.
  • Limit, deductible, range of insured persons, claims history.

How to choose an insurer

  • Make sure the company holds a Bank of Russia licence and has experience settling D&O claims.
  • Check the definition of "claim" — does it include investigations, tax audits and demands from a bankruptcy trustee?
  • Clarify how defence costs are advanced and how a lawyer is chosen.
  • Compare terms in the insurer directory.

Claims handling

  1. Notify the insurer on the first demand, lawsuit or notice of an inspection.
  2. Do not enter into settlements or admit liability without the insurer's consent.
  3. Agree the choice of lawyer and the cost estimate.
  4. Provide documents: minutes of governing bodies, resolutions, financial statements, correspondence.

Common mistakes

  • Buying a policy when financial trouble is already obvious — known circumstances are excluded.
  • An insufficient limit shared by all insured persons and defence costs.
  • No cover for subsidiary liability.
  • The policy is not renewed after a director leaves — former executives are left without protection.

Related types: professional liability, cyber risks. To find the right terms, send a request — Polis Re specialists will ask insurers for offers.