Page 27 - RMAI July-September 2018

July - September 2018

of supervision of the affairs of the Company etc. of accident for which the insured is held responsible
Directors and Officers liability policy is therefore under the law.
designed to provide protection to Directors and
Public Liability Insurance Act : Statutory liability
Officers of a Company against their personal liability caused by an accident in respect of fatal/non-fatal
for financial losses arising out of wrongful acts or injury and property of third party under the Public
omissions in their capacity as directors or officers. The
Liability Insurance Act, 1991.
coverage is granted in two parts under the insuring
Insurance of Persons :
clause:
Group Mediclaim : To take care of the medical
I. Company Reimbursement: Insurance of the
Organization itself - Organization is entitled (and expenses necessitated due to the hospitalization and
domiciliary hospitalization on account of
often obliged) by way of its articles of association to
accident/sickness/disease. Policy may be arranged
indemnify its Directors and Officers. The organization
may only reimburse to the extent of legal costs for only existing employees or employees as well as
their families. Policy may also be enhanced to cover
expended and that only if the Director/Officer
retired employees as well as their families.
successfully defends that action.
Group Personal Accident : For providing
II. Directors and Officers: (a) Insurance of the
compensation to the employees who meet with
Director/ Officer - if the action against him is
accident resulting in fatal or non-fatal injuries. Policy
successful, then the Director/Officer is "on his own".
may be arranged for only existing employees or
He is exposed to possible consequences viz., (a) Civil employees as well as their families. Policy may also be
Action which may involve personal liability for: (i)
enhanced to cover retired employees as well as their
Damages (ii) Claimant's Costs (iii) Costs of Personal families.
Legal Representation. (b) Criminal Action:
prosecution may be brought under various Statutes. Overseas Mediclaim : To take care of medical
expenses incurred while employees visiting abroad
The organization will now of course be precluded
from indemnifying him.(b) The second part of the o n b u s i n e s s o r p l e a s u re t r i p d u e to
cover (D&O) will now respond, provided that the accident/sickness/disease necessitating treatment
abroad.
Director/Officer has not acted in a deliberately
dishonest manner. Whilst fines and penalties under Insurance of Pecuniary Losses :
Criminal Actions are not insurable, Directors and Fidelity Guarantee : For losses caused to the employer
Officers may face substantial costs in arranging legal due to infidelity of the employee who are responsible
representation to defend such actions. These legal for dealing with cash or stores or such other
costs are covered by the D & O insurance provided the valuables.
defense is successful.
Loss of Profits Insurance : To take care of the loss of
Employer's Liability : To take care of the legal liability profits (net profit) and standing charges incurred by
of the Employer towards employees and workmen the insured due to reduction in turnover. These
under Workmen's Compensation Act now Employees policies are granted in conjunction with the material
Compensation Act, 2011. damage policies and are available following Fire,
Product Liability : Covers legal liability of the Machinery Breakdown, Electronic Equipment and
manufacturer of a product towards a customer, Boiler Explosion.
whereby the later can legally claim the compensation Advance Loss of Profit Insurance : When a major
for the damages caused while using an unsafe incident of damage to the works during construction
product manufactured by the former. phase (for a number of small instances) is likely to

Public Liability : For legal liability of the owner in result in delay in the commencement of the
respect of fatal/non-fatal injury caused to third party commercial operation of the plant thereby delaying
personal or damage to third party property arising out the ability to earn the revenue. Advance Loss of Profit

26 RISK MANAGEMENT ASSOCIATION OF INDIA