What is directors and officers (D&O) insurance in Australia?

Directors and officers' insurance may help protect company directors, officers, and senior managers if they are personally named in a claim, investigation, or legal action connected to alleged wrongful acts in their role. Depending on the policy, it may help cover legal defence costs, some investigation expenses, and certain settlements or damages.

D&O insurance follows the person, not just the company. It matters when a director is personally named, when the company cannot indemnify them, or when leadership decisions are challenged. Even if a director successfully defends a claim, the legal costs alone can be significant.

At a glance

• D&O insurance may help protect directors and officers when management decisions are challenged
• It may cover legal defence costs, investigation expenses, and certain settlements, subject to policy terms
• Side A may protect directors personally when the company cannot indemnify them
• Side B may reimburse the company for amounts it spent indemnifying directors
• Side C may cover entity securities claims, mainly for listed companies
• Claims can come from ASIC, shareholders, creditors, liquidators, and other regulators
• D&O is different from management liability, professional indemnity, and public liability
• It may be relevant for private companies, startups, NFPs, and businesses with boards or investors
• upcover arranges directors and officers insurance for eligible Australian businesses.

What is directors and officers insurance?

The policy responds to allegations, not proven wrongdoing. A director does not need to have done anything wrong for a claim to be made and for legal costs to start accumulating. D&O insurance exists because those costs can be substantial, and directors can face them personally.

"Wrongful act" in a D&O policy can include alleged breach of duty, misleading or deceptive conduct, governance failures, mismanagement, or failure to comply with legal obligations, depending on the insurer and wording.

For example, a startup director is named after investors allege misleading statements during a capital raise. A not-for-profit board member faces a governance dispute. A liquidator alleges directors allowed a company to keep trading while insolvent. In each case, the director may face personal exposure.

The policy operates on a claims-made basis. The policy in force when the claim is first made and notified is usually the one that may respond. Notification timing matters. Late notification can affect whether a claim is accepted. D&O can be purchased as a standalone policy or bundled as a section within management liability insurance.

How D&O insurance is structured: Sides A, B, and C

D&O policies are structured around three coverage layers. Understanding which side responds in which situation may help when considering cover options.

Side A: personal protection

Side A may respond when a director faces a covered claim and the company cannot indemnify them. This happens most commonly during insolvency, but it can also occur where the law restricts the company from indemnifying. Side A is often the layer directors focus on because it may respond when company indemnity is not available.

Side B: company reimbursement

Side B may reimburse the company for amounts it has spent indemnifying a director or officer for a covered claim, subject to policy terms. Most companies with a director indemnity in their constitution rely on Side B to protect the company balance sheet after honouring that indemnity.

Side C: entity cover

Side C may cover the company entity itself when it is named in a covered claim alongside directors, subject to policy terms. This is more relevant for listed companies. Not all D&O policies include Side C.

Who does D&O insurance protect?

D&O policies may cover a broader group than just the directors named on the company register. Depending on the insurer and wording, insured persons may include:

• Executive directors
• Non-executive directors
• Company officers and company secretary
• Senior managers acting in a managerial or supervisory capacity
• Past director, through run-off provisions
• Directors serving on outside boards at the company's request

upcover's D&O product highlights outside board roles cover and run-off for past directors, depending on insurer and policy wording.

Why D&O insurance matters in Australia

Australian directors have personal legal duties, including duties under the Corporations Act 2001.

Director duties under the Corporations Act

The Corporations Act 2001 (Cth) sets out core duties every director owes, including care and diligence, good faith, proper purpose, and duties not to misuse position or information (sections 180-184). If those duties are alleged to be breached, directors can be personally named in claims or investigations.

Claims or investigations may come from ASIC, shareholders, creditors, liquidators, WHS regulators, the ATO (director penalty notices), or the company itself. For more on director personal liability, see understanding employer liability for company directors.

When company indemnity is not available

Many companies indemnify directors through their constitution or a deed of indemnity. But that indemnity is not always available. The company could be insolvent or legally restricted from indemnifying. That is where Side A cover becomes relevant, subject to policy terms.

Investors, boards, lenders, and contracts may also require D&O as a condition of appointment or funding. For new directors, see a guide to adding a director to a company.

What does D&O insurance cover?

Coverage depends on the insurer and policy. These are the main coverage areas.

Defence costs

Legal fees, barrister costs, and expert fees for defending a covered claim, subject to policy terms. Defence costs can accumulate quickly, even before any finding is made.

Trigger: ASIC commences proceedings alleging a director failed to act with care and diligence.

Regulatory investigations

May cover legal representation costs when ASIC or another regulator investigates a director's conduct, subject to policy terms.

Trigger: A regulator requests documents and interviews from directors about governance decisions made during a restructure.

Shareholder and investor claims

May respond to allegations that directors made misleading statements, breached duties, or caused financial loss to shareholders or investors.

Trigger: A startup raises funds and misses milestones. An investor alleges the directors overstated the company's revenue pipeline during the capital raise.

Insolvency-related claims

May respond to claims from creditors or liquidators alleging the directors allowed debts to be incurred while the company was insolvent. Side A is particularly relevant here because the company may be unable to indemnify during insolvency.

Trigger: A company fails. The liquidator alleges directors continued trading after the point of insolvency.

Company reimbursement

May reimburse the company for costs it paid to indemnify a director under a deed of indemnity or constitutional provision.

Run-off for past directors

Some policies include run-off provisions that extend cover to directors who have left the company, for claims arising from decisions made during their tenure. This may also be relevant when a company is sold or ceases trading.

The director protection map

D&O covers one part of a director's risk profile. Other business insurance products cover other risks. This map shows which policy may respond to which type of claim.

• Director personally named in a claim about management decisions → D&O (Side A) may respond
• Company indemnifies the director for a covered claim → D&O (Side B) may reimburse the company
• Listed company faces a securities claim → D&O (Side C) may respond
• Employee alleges unfair dismissal or harassment → management liability / EPL may respond
• Employee steals money or commits fraud → crime insurance may respond
• Client sues over professional advice → professional indemnity may respond
• Customer injured on premises → public liability may respond
• Hacker breaches company systems → cyber insurance may respond

What D&O insurance does not usually cover

• Deliberate fraud or criminal acts by the director, once established by final judgment or admission
• Personal profit or illegal remuneration
• Known claims or circumstances before the policy started
• Bodily injury or property damage, which is usually handled by public liability
• Professional advice errors, which are usually handled by professional indemnity
• Employment disputes from staff (that is EPL, usually within management liability)
• Employee theft or fraud, which is usually handled by crime insurance
• Fines and penalties that cannot legally be insured
• Insured-vs-insured claims, unless specific carve-backs apply. See insured vs insured exclusion explained.

Is D&O insurance the same as management liability?

D&O is not the same as management liability. For businesses comparing directors and officers insurance in Australia, the key question is whether the policy protects the people making decisions, the company reimbursing them, or both.

• D&O: director and officer personal liability for management decisions and governance claims
• Management liability: broader package that may bundle D&O with EPL, statutory liability, crime, and tax audit
• Professional indemnity: professional advice or service errors, negligence, and omissions

For most Australian SMEs, management liability is a common starting point. Standalone D&O may be more relevant for listed companies, larger not-for-profits, and investment-backed businesses. For the full comparison, see management liability vs D&O insurance.

Who may need D&O insurance?

D&O insurance may be relevant for any organisation where directors or officers face personal legal exposure. The question is not only company size. D&O may become more relevant when outside parties rely on board decisions, such as investors, lenders, creditors, members, or regulators.

• Private companies with directors making management and financial decisions
• Listed companies with securities disclosure obligations
• Not-for-profits and associations with boards or committees
• Startups raising capital, appointing boards, or onboarding investors
• Companies with external directors or advisors serving on the board
• Companies approaching insolvency, restructuring, or a sale
• Businesses where lenders, investors, or contracts require D&O as a condition

For a detailed guide on who needs D&O and when, see who needs directors and officers insurance.

What affects D&O insurance cost?

D&O insurance costs depend on several factors. These include:

• Revenue and total assets
• Industry and regulatory exposure
• Number of directors and officers
• Public, private, or not-for-profit structure
• Claims history, financial position, and solvency concerns
• Fundraising, M&A, or restructuring activity
• Policy limits and excess
• Whether standalone D&O or management liability
• Geographic exposure and overseas subsidiaries

For a detailed guide on D&O pricing, see how much directors and officers insurance cost.

What you need for a quote

You are usually asked for your ABN, company structure, industry, annual revenue, number of directors and officers, board composition, whether the company has external investors, whether it is raising capital or restructuring, claims history, prior disputes or investigations, preferred limit, and whether you want standalone D&O or management liability.

upcover arranges directors and officers insurance for eligible Australian businesses. Get a quote.

How upcover can help

upcover arranges directors and officers insurance as a standalone product and as part of management liability insurance for eligible Australian businesses with selected insurers and underwriters. Depending on insurer and policy wording, cover may help with legal defence costs, company indemnity reimbursement, investigation expenses, outside board roles, and run-off for past directors.

• 70,000+ businesses covered across Australia.
• 4.9/5 customer rating.
• 80+ insurance partners.

For related guides, see management liability vs D&O insurance, insured vs insured exclusion explained, can a company be sued for mismanagement, and understanding employer liability for directors.

upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.

Frequently asked questions

What is directors and officers insurance?

D&O insurance may help protect directors, officers, and senior managers from personal liability when claims are made about their management decisions. It may cover defence costs, investigation expenses, and certain settlements, subject to policy terms.

What does D&O insurance cover?

It may cover legal defence costs, regulatory investigation costs, settlements, damages, and company reimbursement for director indemnity, depending on the insurer and policy wording.

Who is covered under a D&O policy?

Depending on the policy, insured persons may include executive directors, non-executive directors, the company secretary, senior managers, past directors through run-off provisions, and directors serving on outside boards.

What is Side A D&O insurance?

Side A may protect a director personally when the company cannot or is not permitted to indemnify them, such as during insolvency.

What is Side B D&O insurance?

Side B may reimburse the company for costs it has paid to indemnify a director or officer for a covered claim.

What is Side C D&O insurance?

Side C may cover the company entity itself when it is named in a covered claim, usually for securities-related matters. Not all policies include Side C.

Is D&O insurance the same as management liability?

No. D&O focuses on director and officer personal liability. Management liability is broader and may include D&O plus EPL, statutory liability, crime, and tax audit under one policy.

Does D&O insurance cover ASIC investigations?

D&O may cover legal representation costs when ASIC or another regulator investigates a director's conduct, subject to policy terms and wording.

Does D&O insurance cover insolvency claims?

D&O may respond to claims from creditors or liquidators alleging insolvent trading or breach of duty during financial difficulty. Side A is particularly relevant because the company may be unable to indemnify during insolvency.

What is not covered by D&O insurance?

Common exclusions include deliberate fraud, personal profit, known prior claims, bodily injury, professional advice errors, employment disputes, and fines that cannot legally be insured. Insured-vs-insured exclusions may also apply.

Does D&O insurance protect personal assets?

Side A is designed to respond when the company cannot indemnify a director. If personal financial exposure arises from a covered claim, Side A may help with defence costs and certain liabilities, subject to policy terms.

How do I arrange D&O insurance?

You are usually asked for your ABN, company structure, revenue, number of directors, claims history, and preferred limit. upcover arranges D&O insurance as a standalone product and as part of management liability.

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_{The information in this article is general in nature and provided for informational purposes only. It does not constitute personal insurance, financial, or legal advice. Director duties under the Corporations Act 2001 are subject to change and should be verified with current legislation. Cover types, inclusions, exclusions, and policy structure vary between insurers and policies. Always read the relevant Product Disclosure Statement before purchasing. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions in the relevant PDS. Before deciding whether a product is right for you, consider your circumstances. upcover Pty Ltd ABN 17 628 197 437, CAR 1299211 of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.}