The D&O Proposal: Fair Presentation and Severability

Why the proposal matters more in D&O than almost anywhere else

A D&O policy is unusual: the cover protects individual human beings, but the placement is done by the company. Directors rarely see the proposal form. Someone in finance or the company secretary’s office completes it, the broker presents the risk, and the policy comes back protecting a group of people who had no involvement in the process. That separation creates a specific danger. If the placement is defective — if something material was not presented to insurers — the people who suffer are directors who may have known nothing about the defect and could have done nothing about it.

That is why the two subjects of this page belong together. Fair presentation is about doing the placement properly in the first place. Severability is about making sure that, if the presentation turns out to have been flawed, the flaw does not spread to directors who were innocent of it. A well-placed D&O programme takes both seriously.

The duty of fair presentation under the Insurance Act 2015

Speaking generally, the Insurance Act 2015 requires a commercial insured to make a fair presentation of the risk before the policy is taken out. That means disclosing every material circumstance the insured knows or ought to know — or, failing that, giving the insurer enough information to put a prudent underwriter on notice that it needs to ask further questions. The presentation must also be clear and accessible rather than buried in undigested paperwork, and material representations must be substantially correct or made in good faith.

Two aspects of the duty matter particularly for D&O. First, what the company “ought to know” includes what a reasonable search of information available to it would have revealed — so a company cannot simply avoid asking questions. Second, the knowledge that counts as the company’s knowledge includes, broadly, that of its senior management and of the people involved in arranging the insurance. In a D&O placement, that reaches directly into the boardroom.

Applying it to D&O: whose knowledge counts?

Think about what is material to a D&O underwriter: circumstances that could give rise to claims against directors, disputes brewing with shareholders or regulators, financial stress, governance problems. The people most likely to know about those things are the directors themselves. So a fair presentation for D&O purposes usually means asking the board — actually asking, as part of a reasonable search — whether anyone is aware of circumstances that ought to be disclosed. A renewal completed by one person, on autopilot, without that enquiry, is where placement problems begin.

The uncomfortable corollary: if one director does know something material and it never reaches the presentation, insurers may have remedies under the Act, and depending on the circumstances those can be serious for the policy. The question then becomes the one that severability answers: should that failure damage the cover of directors who knew nothing?

Severability: one director’s knowledge should not sink another’s cover

Severability of the proposal is the wording feature that treats the presentation as if it had been made separately by, or in respect of, each insured person. Its effect, in general terms, is that the knowledge or statements of one director are not imputed to the others for the purpose of deciding whether cover stands. If director A knew of a problem and it was not disclosed, a severability provision aims to preserve the position of directors B, C and D, who did not know and answered honestly.

Without severability, a D&O policy has a single point of failure: the least candid person involved in the placement. With it, each insured person’s cover stands or falls largely on their own knowledge and their own honesty. For individual directors, it is one of the most important protections in the whole wording, and it is worth reading rather than assuming. Provisions differ in how far they go — some treat the knowledge of certain signatories or senior officers differently.

Innocent non-disclosure protections — a wording feature that varies

Related, but distinct, are innocent non-disclosure provisions. In broad terms these say that the insurer will not seek to prejudice the cover of an insured person for a failure in the presentation in which that person was not complicit — sometimes framed as the insurer waiving remedies it might otherwise have against innocent individuals. The strength of these clauses varies genuinely from wording to wording: some are broad and generous, others are narrower or conditional. This is a “check your policy” point in the fullest sense, and a good broker will show you exactly what your wording says before you rely on it.

Warranties and representations — the basics, generically

A brief word on terminology, because proposal forms sometimes use it loosely. A representation is a statement made to the insurer when the risk is presented; if it is wrong, the consequences depend on how wrong it was and what the insurer would have done otherwise. A warranty, in insurance, is a term promising that something is or will remain true, and breaching one has traditionally carried harsher consequences — though the modern statutory regime has softened the old, most brutal outcomes. The practical advice for a board is simple and general: know which statements in your placement documents are which, answer everything accurately, and if a question is ambiguous, say so in the presentation rather than guessing.

An illustrative scenario

The following scenario is illustrative only. It is not a real case and does not describe any real company or individual. A private company renews its D&O policy. The renewal presentation is completed by the finance team and states that no director is aware of circumstances likely to give rise to a claim. Unknown to everyone else, one director has received correspondence threatening proceedings over a soured joint venture. A claim later arrives. Because the policy contains a severability provision and an innocent non-disclosure clause, the insurer’s position against the other directors is assessed on their own knowledge — they answered honestly and their defence costs are met — while the position of the director who knew is assessed separately, on his. For how this changes round by round, see insurance as your company scales.

How Apex approaches D&O placement

As an independent broker, Apex treats the presentation as part of the product. We help boards run the enquiry that a reasonable search requires, present the risk clearly, and we read severability and innocent non-disclosure provisions before recommending a wording — because the time to discover their limits is before you buy, not during a claim.

Frequently asked questions

What does a “fair presentation” actually require of us?

In general terms: disclose the material circumstances your company knows or ought to know after a reasonable search — including what senior management knows — or give insurers enough to prompt further questions, and present it clearly. For D&O, that usually means genuinely asking the board before placement, not just re-signing last year’s form.

If one director knew about a problem and it was not disclosed, do the others lose cover?

Not necessarily. Severability provisions treat the presentation separately for each insured person, so innocent directors’ cover is assessed on their own knowledge, and innocent non-disclosure clauses can protect them further. The strength of these protections varies between wordings, so check yours.

Are warranties still something to worry about in D&O placements?

The modern statutory regime has softened the harshest historical consequences of warranty breaches, but the safe working assumption is unchanged: treat every statement in the placement as one insurers may rely on, answer accurately, and flag uncertainty openly in the presentation rather than guessing.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952).