Directors and Officers liability insurance protects and defends the personal assets of your directors and officers from liability claims arising out of alleged errors in judgment, breaches of duty, or wrongful acts related to their organizational activities. These lawsuits can come from shareholders, employees, business partners, or the public due to the actions of the board.

Many insurance companies also provide Employment Practices Liability, which covers legal defense expenses and damages from lawsuits by employees against wrongful discharge or a hostile work environment.

FAQs

Q. What is the difference between "pay on behalf" and "reimbursement" type Directors and Officers Liability policies?
A. If the policy is written to pay all claims, the insurer must pay any covered judgment. If the policy is written to indemnify the insured for any covered claim settlement, you could have to pay the settlement and be reimbursed by the insurance company.

Q. How are defense costs paid in Directors and Liability policies?
A. It's important to know whether the policy provision for the cost of defending a covered claim is within the Limits of Insurance or in excess of the Limits of Insurance. If the insured is sued and the cost of defending that suit is being deducted from the limit of insurance, the insured could have to pay part or all of a judgment against him that would have been covered had the cost of defense been in excess of the Limit of Insurance provided by the policy. It's best to have coverage that provides for the cost for defense in excess of the Limit of Insurance.

Q. Who can be covered for Directors and Officers Liability?
A. An employee who is not an officer of the company but is involved in the financial decision-making should consider Directors and Officers Liability coverage.