Types of Liability Insurance

February 26, 2015

Explaining D&O and EPLI

Directors and Officers Insurance or (D&O) and Employment Practices Liability Insurance or (EPLI) are important coverages for any business owner.

Directors & Officers Insurance (D&O) is a type of liability insurance covering directors and officers for claims made against them while serving on a board of directors and/or as an officer. This type of insurance covers claims allegedly committed by directors and officers to be vicariously responsible for a wrongful act in their capacity as a director or officer. D&O liability insurance can be written to cover the directors and officers of for-profit businesses, privately held firms, not-for-profit organizations, and educational institutions. There is a variety of Directors and Officers coverage available such as corporate reimbursement coverage, personal liability, and entity coverage. D&O policies may be broadened to include coverage for employment practices liability as well.

Employment Practices Liability Insurance (EPLI) for employers covers employment-related liabilities other than on-the-job injuries. This can include legal fees and damages for suits such as wrongful termination, discrimination, sexual harassment, and other alleged violations of employees’ legal rights.

Directors and Officers of companies both profit and non-profit have a tremendous amount of responsibility when it comes to their company’s operation and representation.

Example of a D&O claim:

Green Company sued directors and officers of competitors Orange Inc. after four employees of Green left to join Orange. Green alleged that the four were still employed by Green when they began sharing proprietary information with Orange. In its suit, Green charged theft of trade secrets. After more than a year of legal wrangling, the case settled. Orange agreed to pay Green $160,000 as a settlement, but not before incurring $355,000 in defense costs.

Example of an EPLI claim:

A mid-level supervisor with a long history of documented performance issues was terminated for smoking in a restricted area of the company’s building where flammable chemicals were stored. The terminated employee, who was 54 years old, responded by suing the company for wrongful termination. He alleged age discrimination on the basis of comments made by his supervisor (such as “You’re too old”) and disability discrimination because the company refused to make accommodations for his high blood pressure. He also alleged he could only be terminated for good cause. The plaintiff sought back pay, front pay, special damages, and attorney’s fees totaling an estimated $275,000, in addition to punitive damages. The company settled with the former employee, paying $350,000, but not before it had paid $130,000 in defense costs.

In each of these examples you can see how the situation starts adding up to unwanted expense. Directors and Officers Insurance (D&O) and Employment Practices Liability Insurance (EPLI) can help address these types of risks.


The Armstrong Company Insurance Consultants  (License #0440075)