What is Directors & Officers Liability Insurance?
Directors & Officers Liability (D&O) offers financial protection for a company or organization’s directors, officers, managing members or equivalent positions while they are working on the company or organization’s behalf. The coverage intends to pay for defense and potential indemnity of legal action taken against these individuals for allegedly breaching their fiduciary duties owed to their stakeholders, donors, etc.
Why Have Directors & Officers Liability Insurance?
D&O liability claims affect all companies and organizations – large, small, public, private or non-profit. The individuals that sit on the board all share a similar exposure. Within all of these exposures the company or organization’s directors and officers personal assets could be up for grabs in a settlement situation. Most companies are not financially stable enough to withstand a class action lawsuit from stakeholders for a public misstatement. In terms of private companies and non-profits, the sky-high costs to defend allegations of unfair business practices are enough to put companies out of business for good.
Directors & Officers Claims Example
Unfair Competition
Smith, the former CEO of Matrix Inc., left the company to start up a new software firm, Neo Co. Soon afterward, Matrix Inc. sued Smith individually as an officer of Neo Co., alleging that Smith had taken with him a corporate license to market certain software. Matrix’s allegations included tortious interference, trademark infringement, and unfair competition. In its suit, Matrix Inc. demanded $10 million in damages, as well as punitive damages. Smith settled with Neo Co. for a payment of $100,000. Additionally, Smith accumulated $245,000 in defense expenses.
Coverage May Include
- Insuring Agreements A, B, C and D available
- Duty to defend or duty to pay policies are available
- Outside Position coverage included for 501 (c) 3
- Additional Side A offered on most forms
- Lifetime reporting for former directors and officers available
- Coverage Territory is Worldwide
- Most policies are fully non-rescindable
- Negotiable settlement clauses
- Policies can package D&O, EPLI, Fiduciary and CRIME, or write them all standalone
- Defense outside the limit available
Eligible Classes
- Accounting firm
- Advertising firm
- Ambulance service
- Architect
- Artisan contractor
- Assisted living
- Auto dealerships
- Bank
- Biological technology
- Camp
- Caterer
- Cemetery
- Collection agency
- Condo-commercial
- Construction
- Consultants
- Convenience stores
- Cooperative-non residential
- Counseling centers
- Country club
- Day care centers
- Distributor
- Drug rehab centers
- Energy
- Engineer
- Fitness center
- Franchisee
- Hair salon
- Hotel/Motel
- Insurance agent
- Janitorial
- Landscaper
- Law Firm
- Manufacturer
- Membership/Recreation club
- Political Action Committees
- Printer/Publisher
- Property Managers
- Real estate agency
- Rental car agency
- Restaurants-fast food
- Restaurants-full service
- Retail store
- Sales/Distributor
- School
- Statistics/analysis
- Supermarket
- Technology
- Telecommunication
- Transportation/Trucking
- Travel agent
- Veterinary clinic
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