What is Directors & Officers (D&O) Insurance?
Directors and officers insurance, most commonly referred to as D&O insurance, is a liability coverage that protects the directors and officers of a company, as well as the company itself, from losses in the event of a lawsuit.
What D&O Insurance Covers
D&O liability insurance protects the personal assets of the directors and officers of a company, and their spouses if they are sued as a result of their role in the company. It also protects the company’s assets and the legal fees and other costs that arise from a lawsuit. The amount of coverage that a company and its directors and officers have depends on the type of D&O policy they purchase, which are listed in more detail below.
What is Not Covered by D&O Insurance
Standard exclusions in D&O policies include:
- Insured vs. insured exclusions: Lawsuits between directors and officers at the same company
- Deliberate Fraud or criminal activity: D&O insurance does not cover losses that occur from crimes that are committed willfully
- Prior acts: acts that are committed outside of the insurance term
- Penalties & fines intended to discourage bad behavior
- Defamation, libel, or slander
- Incidents covered by other types of insurance policies, such as cyber-attacks or catastrophic events
Types of D&O Insurance
Side A
The purpose of Side A coverage is to protect the directors and officers of a company, in the event that the company cannot or will not pay them indemnification (compensation for damages and losses). D&O insurance covers the loss of personal assets, as well as legal fees and other costs that can arise from a claim. It is also known as “direct coverage” or “executive insurance.”
Side B
Under Side B coverage, the company itself is insured. Side B coverage, also known as “corporate reimbursement” reimburses the company for the cost of paying indemnification to its directors and officers in the event of a claim.
Side C
Also known as “entity coverage”,Side C D&O insurance covers claims made directly against the company, rather than its directors and officers.
Who Needs D&O Insurance?
Directors and Officers insurance is important for any organization that has a board of directors. Directors and officers claims are increasingly common, and all organizations with a board of directors, whether public, private or nonprofit are susceptible to D&O exposures. A Chubb study found that 25% of private companies experienced a D&O liability loss in the past three years. Of the companies involved, 96% were financially impacted.
If you have any questions regarding your current coverage or want further information on business insurance offered by Basin Pacific Insurance, Please contact us at (509) 765-4785. Or click here to connect with us.
Leave a Reply
You must be logged in to post a comment.