Directors & Officers (D&O) liability intends to provide coverage for members severing on a board of directors and/or as an officer. A breach of a directors or officers fiduciary responsibilities to a company/entity and any shareholders can expose the directors or officers personal assets.
A D&O policy is a type of errors and omissions policy specifically relating to claims that arise due to a director or officer's rendering or failure to render managerial decisions and actions, within the scope and course of their regular duties, that have adverse financial consequences.
The types of entities that might necessitate a D&O policy can include privately held firms, publicly held firms, for-profit businesses, not-for-profit organizations and educational institutions.
In the face of broad differences in coverage terms from various insurers, now is an important time for you to have a knowledgeable independent agent that can access various insurers to make sure you have the most competitive professional liability program available.
There are generally three insuring agreements under a D&O policy:
• Side A provides personal financial protection of company directors and officers as individuals. This coverage is commonly triggered in situations of bankruptcy or lawsuits filed against the directors and officers by a shareholder on behalf of the company. Side A coverage can be purchased as a stand alone policy known as Independent Director Liability (IDL).
• Side B, also known as Company Reimbursement Coverage, addresses corporate reimbursement in situations where there is a loss to the insured company from having to indemnify their directors and officers who had a claim against them. Side B does not provide protection for the company's/ entity's liability. Side B coverage is most often trigger by the indemnification provisions in the bylaws of the company or entity.
• Side C, also known as Securities Entity Cover, provides protection for the company's or entity's own liability. Publicly traded companies can also obtain cover for claims against themselves for a wrongful act in connection with the trading of its securities.