Directors and Officers Insurance
No matter what size a company is, there is always a chance that it could be targeted with litigation arising from the management decisions of its board members. Exude can help your organization get D&O coverage to protect against possible exposures.
What is Directors' and Officers' Liability Insurance?
A type of liability insurance covering directors and officers for claims made against them while serving on a board of directors and/or as an officer. 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. In effect, the policies function as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences.
The core purpose of a D&O policy is to provide financial protection for managers against the consequences of actual or alleged “wrongful acts” when acting in the scope of their managerial duties as well as payment for defense cost and financial losses.
When is D&O Insurance Payable?
D&O liability insurance is payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.
A D&O policy provides defense costs and indemnity coverage to the entity listed on the policy, which may include the following:
- Personal Liability of company directors and officers as individuals.
- Corporate Indemnification Liability is intended to cover claims against directors and officers for which the company legally indemnifies them.
- Entity coverage for securities claims
Note: A “fraud” exclusion is typically included in a D&O policy, which eliminates coverage for losses due to dishonest or fraudulent acts or omissions, or willful violations of any statute, rule or law.
Some D&O policies can be endorsed to provide employment practices liability (EPL) coverage and/or fiduciary liability protection
Importance of D&O Coverage
Statistics show that shareholders and employees are the most likely group to sue private companies. Other parties may bring suits, such as the corporation itself, competitors, creditors, regulatory bodies, etc.
To help ensure both your officers’ and the company’s well-being, a directors’ and officers’ liability insurance (D&O) policy is part of a comprehensive risk financing strategy.