What is D and O Insurance?
This coverage provides protection for the directors and officers of your company from law suits alleging improper performance of their duties on the company’s behalf. One way to think of directors and officers coverage is professional insurance for the management of corporations to protect their personal assets. Doctors, lawyers, accountants, and insurance agents carry errors and omissions insurance, so should company management.
Directors and Officers insurance can usually have employment practices liability and fiduciary liability added onto the policy. Employment practices will deal with allegations of harassment and discrimination suits. This is where a majority of claims will occur.
When should D and O coverage be purchased?
D and O coverage is needed when a board of directors is assembled to protect them and the company from lawsuits, expensive judgments, and costly ligation.
Is Directors and Officers Insurance really necessary for my corporation?
Yes! The claims made by employees stockholders, and clients will be made against the corporation and against the directors of the company. The directors of the company can be personally liable for the acts of the corporation. Directors will likely refuse to serve on a board of directors and officers without D and O coverage with substantial limits to protect them. They are not going to put their personal assets on the line and subject themselves to large personal awards.
Where do claims come from under a D&O policy?
Directors and officers policies are seeing over 50% of claims come from Employment Practices suits. The EPLI has become the single largest area of claims activity under D&O policies.
What are the coverage parts for a D&O policy?
There are at least four insuring agreements to a competitive Directors and Officers policy: 1.) provides coverage to individual’s directors and officers when not indemnified by the corporation. 2.) provides coverage for the corporation when it indemnifies the directors and officers 3.) provides coverage to the corporation itself for securities claims brought against it 4.) this provides for a sublimit for investigative costs coverage related to shareholders derivative demand.
Directors and Officers Liability Insurance is a coverage no corporation can afford to be without in today’s litigious climate.