Directors & Officers Insurance, commonly called D&O Insurance, is a product to protect against legal action for wrongful acts by corporate directors and/or officers in performing their corporate functions. Claims may include errors, omissions, misleading statements, neglect or breach of duties, breach of authority, mismanagement and copyright infringement to name a few.
Legal action is general brought by shareholders, creditors, employees, suppliers, customers, competitors or regulators.
D&O Insurance is not for just large corporations or for just publicly trade companies. In fact, many not for profit organizations and privately held companies purchase D&O Insurance. The cost to defend or pay a claim can be extremely expensive and those costs can be crippling to a company or even put it out of business. The transfer of this type of risk to an insurance policy can be the difference in many cases in how the company attracts its directors and officers. As most policies include coverage for the board members personal assets.
Policies can be sold to the company or the individual board members may purchase their own coverage. It should be noted that the actions of a director or officer in their capacity as a board member are not insured under a General Liability policy or a Professional Liability policy. However, it should be noted that there is a tendency to package some other coverage with D&O Insurance. It has become a common practice with some carriers to write a policy that incorporates D&O with EPLI (Employment Practice Liability Insurance) and Fiduciary Insurance.
These types of policies are generally tailor made to the specific situation and therefore each policy needs to be managed by a professional agent who is versed in the complexities of the very unique coverage. Understanding the limitations of these policies and when coverage starts and stops in comparison with other coverage that is available is extremely important.
Please contact us to answer any questions you might have or to obtain a quote for you or your board. We have included some actual claims to show the many different exposures you may have as board member.
* Provided by Chubb
** Provided by Arch Insurance Group