Directors and officers liability insurance

What is directors and officers liability insurance?

Directors and officers liability insurance, also known as D&O insurance, is a liability insurance designed to protect directors and executives if they get sued for their role in a business or organization.

This insurance covers the personal assets of directors and company officers in case they are sued.

What can D&O insurance cover?

Directors and officers liability insurance helps mitigate financial risks associated with these roles. This policy typically covers legal bills, settlements and other costs connected to defending against a lawsuit these individuals may face.

• Breach of fiduciary duty: Claims alleging that directors or officers failed to act in the company’s best interest, such as mismanagement of assets or neglect of responsibilities.
• Misrepresentation: Lawsuits involving giving out false or misleading information that affects stakeholders like investors or employees.
• Non-compliance with laws and regulations: Claims arising from the company’s failure to comply with legal or regulatory standards, including labor, environmental and financial regulations.
• Employment practices liability: Employee allegations for discrimination, harassment, wrongful termination or other employment-related disputes.
• Bankruptcy-related claims: In cases of a company’s insolvency, claims from creditors or bankruptcy trustees alleging mismanagement or wrongful actions leading to the company’s financial downfall.
• Shareholder actions: Lawsuits filed by shareholders alleging mismanagement, abuse of authority or decisions that negatively impacted the value of their shares.

D&O liability insurance vs. General Liability vs. Professional Liability

Directors and Officers liability insurance is not the same as general liability or professional liability insurance. While all three types of insurance involve liability coverage, they serve different purposes and protect against different risks.

General liability insurance typically covers claims related to bodily injury, property damage, and advertising or personal injury. It’s designed to protect businesses from third-party claims arising from accidents occurring on their premises or as a result of their operations.

Professional liability insurance, also known as errors and omissions insurance, is specifically tailored to protect professionals against claims of negligence, professional mistakes, or misrepresentation in their services.

On the other hand, D&O insurance focuses on protecting directors and officers of a company from personal liability arising from alleged wrongful acts or negligence in their roles. It covers claims made by shareholders, employees, customers, competitors, or regulatory bodies related to decisions or actions taken by directors and officers in their official capacities.

While there may be some overlap in coverage, each type of insurance serves a distinct purpose and addresses different aspects of liability.

NEXT is not able to provide D&O liability coverage at this time, however, we’re still able to offer general liability, professional liability and employment practices liability insurance (EPLI).

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