What is Directors and Officers Insurance?

Directors and officers are responsible for making difficult decisions that can make—or break—a company. This brings complexities and much risk to a company.

Directors and officers (D&O) insurance is a type of liability insurance that provides protection for corporate directors and officers against claims arising from their actions as corporate leaders. The coverage is designed to help protect these individuals from the financial consequences of lawsuits or settlements related to their actions as directors or officers. Without D&O coverage, executives’ personal assets are at risk in the event of a lawsuit.

D&O insurance typically covers the costs of defending against a claim, as well as any damages or settlements that may be awarded. It can also provide coverage for claims made against the company's officers, directors, and managers.

Some common types of claims that may be covered under a D&O policy include:

• Securities Claims: Claims made by shareholders or investors alleging that the directors and officers failed to properly manage the company or made false or misleading statements in securities filings.
• Corporate governance: Claims made by shareholders or stakeholders alleging that the directors and officers violated their fiduciary duty or engaged in improper or illegal corporate governance practices.
• Mergers and Acquisitions: Claims made by shareholders or stakeholders alleging that the directors and officers failed to adequately disclose information or violated their duty of care in connection with a merger or acquisition.
• Environmental claims: Claims made by regulators or stakeholders alleging that the directors and officers failed to properly manage environmental risks or failed to disclose environmental liabilities.

It's important to note that D&O insurance does not cover intentional illegal acts or criminal behavior by directors or officers. In addition, some D&O policies may exclude certain types of claims, such as claims arising from fraud or embezzlement.

Whether or not you should carry D&O insurance depends on the size and nature of your business, as well as the risks associated with your industry. Companies with a higher risk of lawsuits and regulatory actions may benefit from this coverage, while smaller companies with a lower risk of these types of claims may not need D&O coverage.

Directors and Officers Interactive Scorecard

TROXELL can help you assess your specific needs and determine if D&O insurance is right for your business. Complete this scorecard to better understand the level of risk your business's directors and officers face on a daily basis.

Download the D&O Scorecard

Directors and Officers Insurance Glossary

Directors and officers insurance can be confusing. Policies often contain a variety of terms that can be difficult to understand.  This glossary provides a list of common D&O terms.

Download the D&O Insurance Glossary

Contact the team at TROXELL to determine if E&O coverage is right for your business!

This blog post was written by:

Ryan Augustine