Directors and Officers insurance, commonly called D&O coverage, is liability insurance intended to protect individuals’ assets from lawsuits stemming from managing the organization. A D&O policy will reimburse settlements or defense costs that result from covered claims.
Directors and officers face legal challenges for an assortment of reasons related to their company roles, including but not limited to:
- Breach of fiduciary duty
- Inaccurate or inadequate disclosure of company assets
- Failure to comply with laws or regulations
- Theft of intellectual property
- Poaching a competitor’s customers
- Employment practices and HR issues
It’s a mistaken belief that D&O claims mainly impact public companies. Public, private, and non-profit companies all face D&O litigation risks.
What Does D&O Insurance Cover?
The typical D&O insurance policy contains three types of insuring agreements — referred to as Side A, Side B, and Side C. The insuring agreements essentially encapsulate the following coverage:
- Side A — Protects directors’ and officers’ personal assets.
- Side B — Reimburses company funds used to indemnify sued individuals.
- Side C — Provides companies with balance sheet protection.
- And Side A Excess — Additional Side A coverage if the insured exhausts the rest of the policy.
An organization’s coverage and limits will vary and depend on individual business needs. However, many large organizations purchase a tower of D&O coverage — a primary layer followed by excess layers.
It’s important to remember that company leadership can face lawsuits from more than just investors but also customers, employees, and vendors.
D&O Insurance Specialists
With the growing need to insure this liability, Chivaroli & Associates retains in-house specialists who deal primarily with Directors’ and Officers’ insurance.
We can provide a thorough program analysis to properly align the policy provisions with your organization’s critical needs. Without appropriately insuring against these potential litigations, organizational objectives may suffer, and attracting and retaining top-flight talent could be challenging.
Additional Insurance for Management
While D&O liability insurance helps provide some protection for the management of organizations, there are other insurance policies to consider for additional security, including:
Employment Practices Liability (EPL or EPLI): helps safeguard organizations from claims alleging employers violated their workers’ employment rights.
Fiduciary Liability: protects individuals handling funds or property against claims of mismanagement of an organization’s benefit plans, including retirement and medical benefits.
Commercial Crime: covers organizations from loss of a workplace crime, including theft of money, forgery, and property destruction.
Sometimes, a Management Liability package policy could be the right fit. That package typically combines D&O, fiduciary, and employment practices liability coverage.
