Directors and Officers (D&O) Liability Insurance in India

D&O insurance covers losses of directors and officers, including paying for legal defence costs when they are personally named in a claim over a decision they made running the company. Edify Insurance Brokers is registered with IRDAI as a direct insurance broker (Registration No. 607). We compare D&O wordings across insurers and help your board choose the limits, extensions and run-off terms that fit how your company is owned and funded.

What D&O Insurance Covers

D&O is a liability policy the company buys for its insured persons: typically present and past directors and officers, and in many expanded wordings all employees too. It responds to claims alleging a wrongful act, such as a breach of duty, neglect, errors, omissions, actions or statement, made against them in that role.

Claims can come from shareholders, lenders, employees, customers, competitors, regulators , government or any other stakeholder in business. A formal investigation that requires a director to appear with their own lawyer can also count. Costs start the day someone is named, long before anyone is found liable.

Depending on the wording, a D&O policy can pay:

Defence costs, usually advanced while the matter runs rather than after it ends
Damages, judgments and settlements the insurer has agreed to
Legal costs of responding to an official investigation, often with insurer consent and a sublimit
Bail bond and similar costs, where the wording includes them in defence costs
Public relations costs, usually as a sublimited extension
Claims against a spouse, heir or legal representative pursued only because of the insured person's role or jointly held assets

Each item depends on the wording. Edify specialises in helping identify broad all encompassing wordings once can obtain in the market including but not limited to the listed costs and coverages as stated above.

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Side A, Side B and Side C: Whose Loss Is Paid

The three "sides" describe who receives the money, not how serious the claim is.

Part	Pays	Responds when	Typical buyer
Side A	The individual director or officer	The company cannot or will not indemnify them.	Every D&O buyer; independent directors rely on it most
Side B	The company	The company has already indemnified its director or officer and seeks reimbursement	Most company-bought policies
Side C (entity cover)	The company itself	A claim is made against the company, typically employee or securities claim against a listed company	All Companies for Employee claims and Listed companies for securities claims.

Two points are often misread. insolvency is not a reason D&O fails to respond. It is the situation Side A exists for, because a distressed company often cannot indemnify its Directors or officers. Side C is never packaged as an automatic cover and needs to be purchased when a larger cover is warranted.

What D&O Insurance Does Not Cover

Exclusions common in Indian D&O wordings include:

Fraud, dishonesty, criminal acts and illegal personal profit. In the wordings we reviewed, this exclusion bites once the conduct is established by a final judgment or an admission. Until then defence costs can be advanced, but they must be repaid if the exclusion is later found to apply.
Bodily injury and property damage. These belong under commercial general liability insurance.
Errors in services delivered to clients. These belong under professional indemnity insurance.
Prior or pending litigation, and claims or circumstances known or notified before the policy began.
Claims by major shareholders. Wording typically excludes claims by any shareholder holding more than a percentage of voting capital.
Claims linked to a public offering of securities, unless insured separately through IPO and public offering prospectus liability cover.
Taxes, and fines or penalties that cannot lawfully be insured.

Fines and penalties need particular care. Typical Indian wording includes fines and penalties from with a caveat of the same being insurable by Law. Regulatory penalties in India are never specified as insurable by law narrowing its applicability to a court order superseding the provision. If regulatory penalties are a real exposure for your board, read the exact clause before relying on any summary.

How Timing Works: Claims-Made Cover and Run-Off

D&O is written on a claims-made basis. The policy in force when a claim is first made against you, and reported within the policy's notice terms, is the one that responds. The typical policy notice term starts from the retroactive date of a policy (usually a date when the policy was first bought and continued without a break) till the policy expiry date. When the original decision was taken matters only against the retroactive date.

Three practical consequences follow:

Report early. Notify the insurer as soon as a claim, legal notice or regulator's letter arrives. Most wordings also let you notify circumstances that could become a claim, which ties any later claim to the current policy.
Keep cover continuous. Switching insurers carelessly or letting cover lapse can move the retroactive date and leave earlier decisions uninsured.
Plan for leaving. Cover for directors who resign or retire is generally included in policies but are not indefinite. In the wordings we reviewed, it ranged from a 36-month reporting window after retirement to an 84-month extension that applied only if the company did not renew and had not bought a discovery period. You can have broader wordings which can cover you indefinitely if your company opted for narrower limits at a future date.

If you are leaving a board, or your company is being sold, check the run-off position before your last day.

Who Needs D&O Insurance

Any company whose board and senior managers take decisions that others can challenge carries D&O exposure and every company should seek to have one for themselves. It is usually seen that Companies often buy covers out of compulsions when they:

Raise equity, especially where an investor appoints a nominee director
Appoint independent directors, who often ask about Side A before joining
Carry significant borrowings, or face financial strain that brings creditors closer to the board
Prepare for an IPO, an acquisition or overseas expansion
Operate in a regulated sector where individual officers can be named in proceedings.

Is D&O Insurance Mandatory in India?

Not for most companies. Regulation 25(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires the top 1,000 listed entities by market capitalisation to take D&O insurance for all their independent directors, for a quantum and risks decided by the board. Investors, lenders and acquirers may also require it by contract.

Who Pays the Premium?

It is always paid by the company. Such policies are not taken for specific named insured but for all relevant decision makers making it specific to a company’s requirement to protect its decision maker and cannot be tied to any specific functionary

Three practical consequences follow:

Report early. Notify the insurer as soon as a claim, legal notice or regulator's letter arrives. Most wordings also let you notify circumstances that could become a claim, which ties any later claim to the current policy.
Keep cover continuous. Switching insurers carelessly or letting cover lapse can move the retroactive date and leave earlier decisions uninsured.
Plan for leaving. Cover for directors who resign or retire is generally included in policies but are not indefinite. In the wordings we reviewed, it ranged from a 36-month reporting window after retirement to an 84-month extension that applied only if the company did not renew and had not bought a discovery period. You can have broader wordings which can cover you indefinitely if your company opted for narrower limits at a future date.

If you are leaving a board, or your company is being sold, check the run-off position before your last day.

How Much Cover and What It Costs

There is no standard rate card for D&O. Insurers price each company on its risk, including:

Revenue, assets and industry
Listed or unlisted status, and any securities exposure in the US or Canada
Funding stage and shareholding pattern
Financial health and borrowings
Claims history and known circumstances
Subsidiaries and overseas operations
The limit, retention and extensions chosen

When choosing a limit, remember that defence costs usually sit inside it. A long investigation can use up much of the limit before any settlement is discussed. Some wordings add a separate limit for non-executive directors that applies once the main limit is exhausted.

To quote, insurers typically ask for a completed proposal form, the latest audited financials, the shareholding pattern, board composition, a list of subsidiaries, any current D&O policy and details of past claims or known circumstances.

D&O Compared With Other Liability Policies

Policy	Responds to	Main insured
D&O	Claims about management decisions	Directors and officers, and the company in limited cases.
Commercial general liability	Bodily injury and property damage to third parties	The company and their employees.
Professional indemnity	Errors in services delivered to clients	The company and their employees.
Cyber liability	Data breaches and their direct costs	The company
Commercial crime and fidelity	Theft or fraud that causes loss to the company	The company
IPO and prospectus liability	Claims connected with a public offering of securities	Directors and officers, the company, Shareholders & Underwriters of the issue

One event can involve more than one policy. After a data breach, cyber insurance may pay the response costs while D&O responds to a separate allegation that the board failed to oversee cyber risk.

What Happens When a Claim Arrives

Tell us straight away. Do not admit liability, offer a settlement or appoint lawyers at the insurer's cost without the insurer's written consent.
Send us the notice, summons or regulator's letter and any related correspondence.
We notify the insurer in the form the policy requires and seek consent for defence counsel and fees.
Defence costs are submitted as the matter proceeds, subject to the policy terms.
Any settlement is agreed with the insurer before it is offered.

The insurer decides whether a claim is covered. Our job is to notify correctly and on time, present the case for cover and keep the process moving.

How Edify Helps

Edify Insurance Brokers Private Limited is registered with IRDAI as a direct (life and general) insurance broker, Registration No. 607. For D&O, we:
- Review your current wording, or your board's needs if you have no policy yet
- Approach insurers and compare their quotes and wordings side by side
- Explain the differences that matter: Side A strength, fines, investigation cover, run-off and exclusions
Support notification and follow-up if a claim is made

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Frequently Asked Questions

Does D&O insurance cover independent directors?

Yes, Independent and non-executive directors are normally insured persons. They depend most on Side A, because they cannot control whether the company indemnifies them. Some wordings add a further limit for non-executive directors once the main limit is used up.

Does D&O insurance cover regulatory investigations?

Typically all wordings should have an investigation cost cover, but it is important to ensure that it exists in the policy one is buying. Some policies even have limits which allow expenses to a regulatory crisis to preclude the situation from evolving into an investigation.

Does D&O insurance cover fraud allegations?

Defence costs are usually advanced while fraud is only alleged. If fraud or dishonesty is established by a final judgment or an admission, the exclusion applies and advanced costs may have to be repaid.

Can a private limited company or startup buy D&O insurance?

Yes, Unlisted companies buy D&O, and at least one Indian insurer offers a pre-underwritten policy for smaller unlisted companies. Investors often raise it around a funding round.

Am I covered after I resign as a director?

Only if the claim is made while a policy or an extended reporting period still responds. You can ensure by seeking the right wordings from an insurer to ensure that you are covered sufficiently even if your company discontinues the protection in the future.

Does D&O insurance pay fines and penalties?

It depends on the wording and the law. Some wordings exclude fines and penalties altogether; others cover them only where they are insurable. Taxes are typically excluded.

Talk to Us About Your Board's Cover

Tell us whether your company is listed or unlisted, how many directors you have and whether you already hold a policy. We will come back with the questions insurers will ask and the wording points worth checking.