Directors and Officers Liability (D&O)

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Directors and Officers Liability (D&O)

Directors and officers liability covers defense costs and damages for claims made against individuals while serving as the director or officer of an organization when employees, investors or customers file lawsuits due to their wrongful acts in managing a company. The insurance covers settlements including legal fees and protects the personal assets of the director or officers as well as your organization’s assets.

Directors and Officers Liability comes in handy as there are numerous reasons for which they can be sued as below:

  • Fraud
  • Misuse or Misrepresentation of company funds and assets
  • Breach of fiduciary duty resulting in financial losses or bankruptcy
  • Failure to comply with workplace laws
  • Theft of intellectual property and poaching of competitor’s customers
  • Lack of corporate governance

The policy consists of two coverages; the first reimburses the insured organization when it is legally obligated to indemnity corporate directors and officers for their acts; and the second provides direct coverage to directors and officers when the organization is not legally obligated to indemnify them. D&O forms are written on a claims-made basis, generally contain no explicit duty to defend the insured, and typically exclude intentional/dishonest acts, bodily injury, and property damage.

D&O liability insurance can be written to cover the directors and officers of for-profit businesses, privately held firms, not-for-profit organizations, and educational institutions. The coverage is highly recommended for publicly traded companies with a corporate board or advisory committee.

Premium for directors and officers liability insurance is dependent on the type, structure, financial circumstance, and history of the business.

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