Protecting the people behind the strategy.
The directors and officers hold fiduciary responsibility to the company as well as its customers and stakeholders. When their decisions are called into question, lawsuits are common, and the directors and officers can be held personally liable. Directors and officers liability insurance offers coverage as well as peace of mind.
Understanding D&O Insurance
Directors and officers liability insurance, also known as directors and officers insurance or simply D&O insurance, is a specialized form of management liability insurance designed to cover lawsuits stemming from the actions of the directors and officers.
Many lawsuits name both the individual directors and officers as well as the company itself, so all three sides of coverage work together to provide strong coverage.
Frequently Asked Questions
What does Directors and Officers (D&O) insurance cover?
D&O insurance provides liability coverage for claims stemming from the way directors and officers carry out their duties and the actions and decisions that they make while serving the company. Lawsuits covered under D&O insurance may be brought by investors, employees, customers, vendors and other third parties. Common allegations include breach of duty and misrepresentation. D&O insurance typically excludes criminal acts, and other restrictions and exclusions may also apply.
In the event of a covered lawsuit, D&O liability insurance can cover legal costs, including defense and settlements or awards, up to the policy limits and under the terms of the policy. Many policies have “shrinking limits,” meaning that payments toward defense costs reduce the amount of coverage available for settlements and awards. This should be taken into consideration when deciding on appropriate coverage limits.
Do private companies need D&O insurance, or is it only for public companies?
Although D&O insurance coverage is most often associated with public companies, private companies can also benefit from D&O insurance. D&O lawsuits often come from investors, which is why public companies have significant D&O exposures, but D&O lawsuits can also come from other third parties, such as customers or vendors. Directors and officers insurance for nonprofits also provides important protection.
What’s the difference between D&O insurance and general liability insurance?
General liability insurance and D&O insurance both provide liability insurance, meaning they both cover lawsuits stemming from third parties, but the types of lawsuits they cover are very different.
General liability insurance covers third-party claims of bodily injury or property damage arising out of your business operations and premises. In contrast, D&O insurance provides executive and board of directors insurance protection, covering claims stemming from the actions and decisions of your company leaders.
A classic example of a general liability insurance claim involves a customer who slips and falls on your business premises and sues your business over their injuries. A classic example of a D&O insurance claim is a business leader who is sued by the company’s stakeholders over an alleged breach of duty. Many organizations need both general liability insurance and D&O insurance.
How much does D&O insurance cost for small businesses or nonprofits?
The cost of D&O insurance varies significantly based on your company’s size, structure, loss history, coverage limits and other factors. Private company D&O insurance tends to cost considerably less than public company D&O insurance due to the reduced risk involved, and smaller organizations will typically pay less than larger organizations.
Small businesses and nonprofits can often find very affordable D&O insurance coverage. The best way to see how much you’ll pay for D&O insurance is to request a D&O quote.
How do I get a D&O insurance quote for my company?
To get a directors and officers insurance quote, you’ll need to provide a little information about your company. Use the link below to get started.