Directors & Officers Insurance (D&O)
Liability coverage protecting corporate directors and officers from personal financial loss arising from management decisions.
What is D&O Insurance?
Directors and officers (D&O) insurance protects the personal assets of corporate executives and board members against claims alleging wrongful acts in their management capacity, including breach of fiduciary duty, misrepresentation, misuse of corporate funds, and employment practices violations. D&O policies have three standard coverage parts: Side A covers individual directors and officers when the company cannot indemnify them; Side B reimburses the company when it indemnifies its directors and officers; Side C (entity coverage) protects the company itself against securities claims. D&O is essential for publicly traded companies and increasingly required by investors in private companies.
Example
Shareholders of a publicly traded company file a securities class-action lawsuit alleging that the CEO and CFO made materially false statements about projected earnings. The company's D&O policy covers legal defense costs estimated at $8 million and contributes to a $25 million settlement, protecting the executives' personal assets from the outcome.
Source: National Association of Insurance Commissioners — Directors and Officers Liability