Coverage Snapshot: D&O Liability

You’ve probably heard the term Directors and Officers Liability or D&O, but what exactly is it and why is it important you and your business? 

Directors & Officers Liability is an insurance policy that protects both the personal assets of individual Directors and Officers of a company, as well as the corporate balance sheet for the company they work for.  

Most D&O Liability policies include three major coverage components, which are universally recognized as: 

Insuring Clause A 

aka Side A – Protects the personal assets of the individuals Directors & Officers for scenarios where the company they work for us unable to indemnify them. 

Insuring Clause B 

Policy reimburses the company for indemnification provided to individual D&O’s. 

Insuring Clause C 

Policy reimburses the company for claims where the company is named, subject to the exclusions in the policy. Note that for publicly-held companies, the Coverage C is only available for securities claims against the entity. 

Equally as important as understanding the basic tenants of a D&O policy is recognizing the impact that individual definitions, exclusions, or conditions can have on any given claims scenario. It is the job of a trusted insurance advisor to strengthen, as much as possible, definitions, such as Claim or Loss while restricting, as much as possible, exclusions, such as Fraud exclusions Entity versus Insured exclusions. 

Contact us to learn more about our Management Liability Practice and expertise.