Glossary term
Directors and Officers (D&O) Insurance
Directors and officers insurance helps protect company leaders and organizations from covered claims tied to management decisions.
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What Is Directors and Officers Insurance?
Directors and officers insurance, often called D&O insurance, helps protect company leaders and organizations from covered claims tied to management decisions. It can cover defense costs, settlements, or judgments when directors or officers are accused of wrongful acts in their leadership roles.
D&O coverage is common for public companies, private companies, nonprofits, and organizations with boards. The policy does not cover every bad outcome or every dispute; it responds only under the policy's terms.
Key Takeaways
- D&O insurance addresses management liability, not ordinary property or workplace injury risk.
- It can protect individual directors and officers when indemnification is unavailable.
- Policies often include different coverage parts for individuals and the organization.
- Exclusions, claim definitions, defense provisions, and limits are central to the coverage.
Coverage Parts
D&O policies are often described in sides. The exact wording varies, but the structure helps explain whose loss is being covered.
Coverage Part | Typical Purpose |
|---|---|
Side A | Protects individual directors and officers when the organization cannot indemnify them. |
Side B | Reimburses the organization when it indemnifies directors and officers. |
Side C | Provides entity coverage for certain claims against the organization. |
Defense costs | Can reduce the available policy limit, depending on policy wording. |
Claims Context
D&O claims can involve alleged breach of fiduciary duty, misrepresentation, securities claims, governance disputes, merger objections, regulatory investigations, or creditor claims after financial distress. Private and nonprofit organizations may also face claims from investors, donors, employees, competitors, or regulators.
D&O is often coordinated with employment practices liability, fiduciary liability, errors and omissions, and cyber coverage because management claims can overlap with other risks.
What to Review
Review insured persons, entity coverage, exclusions, retention, defense provisions, prior acts, change-in-control terms, outside directorship coverage, and whether defense costs are inside the limits.
The Bottom Line
D&O insurance is liability protection for leadership decisions. It can be essential for board service and company governance, but the policy wording determines how much protection exists.