Directors & Officers Insurance (D&O)!
What is Directors and Officers Insurance?
Directors and Officers Liability Insurance provides financial protection for the directors and officers of your company in the event they are sued in
conjunction with the performance of their duties as they relate to the company. Think of Directors and Officers Insurance as a management Errors and
Omissions policy.
Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves
harassment and discrimination suits, and is where the majority of your exposure will be.
Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with
performance failures and negligence with respect to your products and services, not the performance and duties of management. Generally it is a good
idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
When do I need Directors & Officers Insurance?
You need Directors and Officers Liability insurance when you assemble a board of directors. They will frequently make the requirement.
Investors, especially Venture Capitalists, will also usually require that you show evidence of Directors & Officers Liability insurance as part of the
conditions of funding your company.
Also having employees opens management up to employment practices lawsuits - which usually can be covered under D & O insurance.
Why do I need Directors and Officers Liability Insurance?
First, you need Directors & Officers Insurance because claims from stockholders, employees, and clients will be made against the company, AND against
the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be
protected rather than put their personal assets at stake.
Secondly, you need Directors and Officers Insurance because: Investors and members of your board of directors will not be willing to risk their personal
assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company.
Lastly, employment practices suits constitute the single largest area of claim activity under D&O policies. Over 50% of D&O claims are employment
practices related.
D&O is written to:
What are the Sources of D&O Claims?
Shareholders, Investors, Partners and Members:
Merger / Acquisitions Conflict of interest
Financial performance Bankruptcy
Executive compensation Inadequate / Inaccurate disclosure
Stock or other offerings Financial reporting
Customers, clients and consumer groups:
Extension, refusal of credit Restraint of trade
Debt collection Dishonesty
Deceptive trade practices Cost, quality of product or service
Contract dispute Lender liability
Other third party claims against Directors and Officers (including competitors)
Anti-trust Prospective company acquisition
Copyright / patent infringement Company defamation
Business interference Tax issues
Competitor disputes Regulatory / other government issues
What is Directors and Officers Insurance?
Directors and Officers Liability Insurance provides financial protection for the directors and officers of your company in the event they are sued in
conjunction with the performance of their duties as they relate to the company. Think of Directors and Officers Insurance as a management Errors and
Omissions policy.
Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves
harassment and discrimination suits, and is where the majority of your exposure will be.
Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with
performance failures and negligence with respect to your products and services, not the performance and duties of management. Generally it is a good
idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
When do I need Directors & Officers Insurance?
You need Directors and Officers Liability insurance when you assemble a board of directors. They will frequently make the requirement.
Investors, especially Venture Capitalists, will also usually require that you show evidence of Directors & Officers Liability insurance as part of the
conditions of funding your company.
Also having employees opens management up to employment practices lawsuits - which usually can be covered under D & O insurance.
Why do I need Directors and Officers Liability Insurance?
First, you need Directors & Officers Insurance because claims from stockholders, employees, and clients will be made against the company, AND against
the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be
protected rather than put their personal assets at stake.
Secondly, you need Directors and Officers Insurance because: Investors and members of your board of directors will not be willing to risk their personal
assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company.
Lastly, employment practices suits constitute the single largest area of claim activity under D&O policies. Over 50% of D&O claims are employment
practices related.
D&O is written to:
- Protect the personal assets of a company's directors and officers
- Protect the company's assets
- Provide reimbursement to the organization to indemnify D&O's for their losses and
- Help the company monitor and provide defense costs associated with responding to lawsuits and investigations.
What are the Sources of D&O Claims?
Shareholders, Investors, Partners and Members:
Merger / Acquisitions Conflict of interest
Financial performance Bankruptcy
Executive compensation Inadequate / Inaccurate disclosure
Stock or other offerings Financial reporting
Customers, clients and consumer groups:
Extension, refusal of credit Restraint of trade
Debt collection Dishonesty
Deceptive trade practices Cost, quality of product or service
Contract dispute Lender liability
Other third party claims against Directors and Officers (including competitors)
Anti-trust Prospective company acquisition
Copyright / patent infringement Company defamation
Business interference Tax issues
Competitor disputes Regulatory / other government issues
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Or use our Contact Us form to
submit an email.
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