What is Directors and Officers Liability Insurance?
Directors and Officers Insurance, also known as D&O Insurance, provides liability protection for the company’s directors and officers. This policy covers claims resulting from legal action taken against wrongful deeds committed by individuals acting in their capacity as directors and officers. Standard commercial general liability insurance does not provide protection for this exposure.
What is the purpose of Directors and Officers Insurance cover?
The purpose of Directors and Officers Insurance is to provide financial protection to the directors and officers of a company. Typically, this policy will pay for lawsuit settlements and associated legal fees. D&O insurance policy is quite valuable because it enables companies to attract superior talent for their leadership positions.
What are additional coverage options?
Directors and Officers Insurance has applications in many industries, and insurance carriers have specific policies designed for each type of industry. These policies contain coverage forms and endorsements which reflect the unique exposures in that particular field. Some of the more common policy options are:
- Defense Outside the Limits – offers coverage of legal defense expenses beyond the base policy limits. This allows the core policy limits to remain intact.
- Regulatory Proceedings – extends coverage to pay for costs associated with regulatory investigations.
- Intellectual Property – extends coverage to protect directors and officers from allegations related to intellectual property theft.
Is Directors and Officers Insurance Mandatory?
Directors and Officers Insurance is typically not mandated. Frequently, companies obtain this coverage as a means of attracting outside talent to their executive team. Also, many organizations consider it to be an important risk management tool.
In which Industries is Directors and Officers Insurance Most Common?
Although there is a broad range of industries and corporate structures that benefit from Directors and Officers Insurance, the more common institutions are:
- Condominium and Homeowners Associations
- Public Companies
- Health Care Organizations