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.

Real Life Exposures

A bankruptcy trustee of an electronic components manufacturing company with $29 million in revenues and a group of unsecured creditors of the company sued its directors and officers for failure to identify, evaluate, negotiate, and secure the sale of company assets in a timely manner, which resulted in the company defaulting on its outstanding loans and filing Chapter 7 bankruptcy. A final settlement of $975,000 was paid along with defense costs exceeding $360,000. **

The common shareholders of a real estate company with $42 million in revenues sued its directors for breach of fiduciary duty, breach of authority, and waste of corporate assets. The lawsuit alleged that the directors had improperly approved substantial salary increases and excessive yearend bonuses for the company’s officers at a time when the company was financially distressed. The directors believed that such compensation was warranted in order to retain key employees. The company incurred $245,000 in defense costs defending the directors for their actions. **

A group of shareholders of an oil & gas company with $51 million in revenues brought a derivative demand against its CEO and CFO alleging they were negligent in the management of the company and its operations. Additionally, it was alleged they transacted business with related third parties, ultimately benefiting themselves personally, but to the detriment of the company and its shareholders. The company sustained $310,000 in defense costs and the two officers were held personally liable to repay their improper gains of $690,000 to the company, although they never admitted to committing any wrongdoing. The D&O insurance company funded both the defense costs and indemnity amounts. **

A promotional advertising company sued the directors and officers of a magazine publisher with $41 million in revenues for copyright infringement. The lawsuit alleged the publisher had improperly and illegally used the company’s copyright in several of its advertisements for a period of six months. The lawsuit was eventually settled on nonmonetary terms after the directors and officers incurred just over $150,000 in defense costs. **

* Provided by Chubb
** Provided by Arch Insurance Group

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Directors and Officers Insurance

Directors and Officers Insurance offered Nationwide! We offer Professionals, Transactional, Title Agencies, Accountants, Lawyers, Architects, Engineers, and Litigation Containment.
Call Toll Free: 1-800-368-3363 or local St.Pete | Tampa: 727-346-9472