Directors & Officers Insurance

Whether your company has a board of directors or if you serve on a board, you and your board members are at risk of being accused of wrongful misconduct resulting from board decisions.

Directors & Officers Insurance (D&O) is the appropriate vehicle to transfer this risk to an insurance company. Any claim, whether legitimate or frivolous, needs to be responded to by an attorney and your D&O Insurance will provide representation as part of the policy coverage. 

The D&O policy addresses claims on "claims made” basis rather than "occurrence” basis as most other insurance policies. Typically, many professional liability claims are not discovered until well after the incident took place, so coverage is dependent on whether a policy IS in force rather than whether a policy WAS in force. What this means to a D&O policyholder is that premiums must continue to be paid to have coverage for prior acts. It does not mean that a policyholder cannot change companies; they can as long as the new company provides coverage on a retroactive basis. Also, the policyholder who wants to close the business and cancel coverage can purchase "tail coverage” for a period of years that will respond to any claims presented as a result of prior acts.

While historically, only company directors and officers were provided coverage, the newer policies have extended the coverage to include upper-level management and non-executive employees. It’s also important to note that board members of non-profit organizations face the same risk as for-profit board members. Claims can be brought by the company’s stakeholders, investors, lenders, employees and security and bond holders.

The customary exclusions found in the policy include fraud, personal profiting and various other illegal compensation activities, pending and prior litigation and any other claim that is covered under a different type of insurance policy such as bodily injury or property damage claims. There are also rules that pertain to a carrier canceling or non-renewing a policy and your rights as a policyholder.

When considering Directors & Officers insurance coverage, there are many questions to be asked as you can see, and many scenarios to discuss. Contacting an experienced agent should be your first step so that we can offer you professional assistance with navigating coverages provided and limits offered.

D&O Insurance is one of the most complex and misunderstood insurance products on the market today.It comes in many shapes and sizes, and an experienced agent needs to be consulted to provide the information necessary for the business owner to obtain the best package to meet the needs of the organization, and its board members. Contact us today to discuss your needs and how we can help you meet them.