State True or False: D&O is not applicable when there is employee fraud. TRUE FALSE
Answer (1)
The question asks if D&O (Directors and Officers) insurance is not applicable when there is employee fraud. The statement provided is False .
D&O insurance is purchased by companies to cover damages or defense costs incurred by directors and officers in the event they are sued for alleged wrongful acts while managing the company. This includes a variety of legal issues such as breaches of duty, neglect, mistakes, or errors, including those related to employee fraud.
Here's how D&O insurance can relate to employee fraud:
Coverage : If a company's directors or officers are accused of failing to prevent employee fraud, D&O insurance can provide coverage for legal defense costs and any settlements or judgments against them.
Applicability : D&O policies vary, but generally, they do provide coverage for claims made by employees or shareholders regarding negligence or oversight connected to fraudulent activities.
Exclusions : It is important to understand the specific policy terms since some D&O policies might exclude certain types of fraud-related claims if the directors or officers themselves are complicit in the fraudulent acts.
In summary, D&O insurance can indeed apply in situations involving employee fraud, particularly when directors and officers are accused of negligence in oversight. Therefore, the statement that D&O is not applicable when there is employee fraud is false. It's always essential, though, for companies to review their specific D&O policy terms.
