Risk Management

Directors and Officers Insurance

No matter what size a company is, there is always a chance that it could be targeted with litigation arising from the management decisions of its board members. Exude can help your organization get D&O coverage to protect against possible exposures.

What is Directors’ and Officers’ Liability Insurance?

Unlike a commercial general liability insurance (CGL) policy that provides coverage for claims arising from property damage and bodily injury, a directors’ and officers’ liability (D&O) policy specifically provides coverage for a “wrongful act,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.

A D&O policy provides defense costs and indemnity coverage to the entity listed on the policy, which may include the following:

  • Coverage for individual directors and officers
  • Reimbursement to the business for a contractual obligation to indemnify directors and officers who serve on the board
  • Protection for the organization or entity itself

What Protection Does D&O Offer?

Typical Directors & Officers Coverage Inclusions

  • Entity coverage
  • Payment priority for insured persons
  • Severability of the insured as well as severability of the application
  • Coverage over time – for past, present, and future directors and officers
  • Pay on behalf clause

Note: A “fraud” exclusion is typically included in a D&O policy, which eliminates coverage for losses due to dishonest or fraudulent acts or omissions, or willful violations of any statute, rule or law.

Some D&O policies can be endorsed to provide employment practices liability (EPL) coverage and/or fiduciary liability protection.EPL

  • Endorsement – broadens coverage, but often does not provide a duty to defend clause and are subject to a substantial deductible
  • Fiduciary Liability Endorsement – provides coverage for liabilities arising out of ERISA, where fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of alleged errors, omissions or breach of their fiduciary duties

Did you know?

Statistics show that shareholders and employees are the most likely group to sue private companies. Other parties may bring suits, such as the corporation itself, competitors, creditors, regulatory bodies, etc.

To help ensure both your officers’ and the company’s well-being, a directors’ and officers’ liability insurance (D&O) policy is part of a comprehensive risk financing strategy.