Directors & Officers (D&O) Liability Insurance
What is D&O Insurance?
Directors and Officers insurance (D&O Insurance) protects a company against liability while managing their business. The policy will cover defense costs and settlements resulting from claims that allege a breach of fiduciary duty, errors and omissions, and misrepresentations.
Who Needs D&O Insurance?
- Public, Private, and Non-Profit companies are susceptible to D&O Claims.
- All businesses that have a board of directors, stockholders, investors, creditors, or anyone that may suffer from allegations of financial misrepresentation made against them.
Why Buy D&O Insurance?
- Policy will provide coverage for any past, present, or future director or officer of your company
- The policy will protect the individual director’s or officer’s personal assets in the event of a company’s bankruptcy
- The policy will provide corporate balance sheet protection for indemnifiable claims and claims made against the company
- Policy will provide defence cost coverage for covered claims
- Attract investors
D&O Insurance Explained
The ABC Insuring Agreements
There are three parts to a D&O Policy: Side A, Side B, Side C.
Stand Alone Side A Coverage
- Additional limit can be purchased through a separate Side A policy that provides non-indemnifiable coverage. Often these policies will include a ‘difference-in-condition’ feature.
- This policy sits excess of the traditional underlying program (ABC) or can drop down to provide primary Side A coverage.
- Typically, the only exclusion that applies in these policies is the conduct exclusion.
What is Not Covered in a D&O Policy?
Common D&O Exclusions
Insured Versus Insured
Private company D&O policies do not want to insure board infighting. This provision excludes claims from one insured person suing another insured person.
The policy will not provide coverage for intentionally bad acts or criminality.
Breach of Contract
The policy is not intended to pick up claims for parties voluntarily undertaking risk in normal business transactions
Prior Acts / Prior and Pending Litigation
These policies are claims made. The policy will only provide coverage when a claims is made during the policy. Loss that occurs outside this time frame will not be covered.
These policies will not provide insurance that is outside the scope of coverage for the company and it’s leadership. This will typically include bodily injury, property damage, and employment practices liability.
D&O Insurance Claims
Directors and Officers can be susceptible to a variety of different situations that can stem from a number of wrongful act accusations. Examples are:
This may include allegations of unfair trade, tortious interference, or any anti-competitive behavior
Creditor or debt holders may allege misrepresentation or look to recover funds
Shareholders may allege a breach of fiduciary duty that caused them a financial loss
A company may be responsible for requiring information and documentation in response to a subpoena
If you have questions about Directors & Officers Insurance, reach out to Dan Vecchio, Management Liability Practice Leader at Founders Professional. Dan assists businesses of all sizes, public and private, in securing the appropriate coverages for their executive risk needs. Dan.Vecchio@founderspro.com