Directors and officers (D&O) Liability Insurance is coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization. It can also cover the legal fees and other costs the organization may incur as a result of such a suit.
D&O liability insurance can be written to cover the directors & officers of
- For-Profit Businesses
- Privately-Held Firms
- Not-for-Profit Organizations
- Educational Institutions
This coverage can also extend to criminal and regulatory investigations or trial defense costs.
D&O liability insurance is related to corporate governance, corporate law, and the fiduciary duty owed to stakeholders, such as shareholders and beneficiaries. US federal law grants Directors & Officers broad discretion in their business activities. Corporate law is typically handled at the state level. Publicly traded companies are subject to more federal regulation than privately held companies.
Key Points
- D&O Liability insurance covers directors and officers and/or their company or organization if sued
- Typically covers claims resulting from managerial decisions that have adverse financial consequences
- D&O insurance claims are paid to cover losses associated with the lawsuit, including legal defense fees
D&O insurance has become closely associated with broader management liability insurance, which covers liabilities of the corporation, as well as the personal liabilities for the directors and officers of the corporation.
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