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Directors and Officers

Coverage that protects board members and officers against legal expense if sued over a decision that led to financial loss.

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DIRECTORS AND OFFICERS

What is directors and officers insurance?

Directors and officers insurance protects board members and officers against legal expenses if they are sued for a decision they made on behalf of the company that led to a financial loss.

When does a business need directors and officers insurance?

Any company or nonprofit organization that has a board of directors should consider directors and officers insurance (D&O, also called management liability insurance. D&O protects board members from lawsuits over decisions they make while serving on your board. If they're sued, they could have to pay thousands of dollars in legal costs.

Securing this coverage protects your board members and the officers they elect or appoint. It helps your business attract and retain top talent since they know they'll be protected. Most board members will expect your business to carry this policy.

How does directors and officers insurance protect board members?

Your board members and officers face many of the same risks as your business: lawsuits over hiring and firing decisions, trademark issues, and mismanagement of funds. Unlike your business, they are not protected by general liability or professional liability policies. If they're sued, D&O insurance will help pay the cost of hiring an attorney, judgments, settlements, and other expenses related to the lawsuit.

Factors that impact the cost of directors and officers insurance include:

Number of directors on the board

Number of employees

Geographic footprint

Company finances

Potential for initial public offering

Risk profile

Deductible amount

Past claim history

What does directors and officers insurance cover?

Directors and officers insurance, also called management liability insurance, covers legal expenses when board members are sued over decisions they made on behalf of the company.

D&O insurance provides coverage for:

Mismanaged funds

If a board member is sued for misappropriating funds or making poor investments, directors and officers insurance helps pay for legal fees.

Employee lawsuits

Workers can sue board members for a variety of reasons, including discrimination, wrongful termination, invasion of privacy, and even emotional distress if they're not satisfied with leadership. D&O insurance helps board members with lawsuit costs and protects their personal finances.

Libel and other advertising injuries

A competitor may accuse a company's board members of defamation or stealing intellectual property, which could result in a lawsuit covered by D&O insurance.

Failure to follow organizational bylaws

If board members or executives violate one of the organization’s bylaws, they could be sued by shareholders, employees, or other board members.

Failure to comply with regulations

A company's board of directors can be held liable if the organization fails to comply with industry standards or regulations. D&O insurance offers protection against such lawsuits.

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