Why Is Directors and Officers Insurance important?

February 12, 2022

Corporate Directors and Officers Insurance (D&O) Protects Corporate Directors and Officers from Personal Liability

Most business insurance policies are meant to protect a company’s assets and earnings. The purpose of Directors and Officers, often known as D&O Insurance, is to protect and defend the personal assets and income of boards of directors, employees and corporate officers.

D&O Insurance isn’t just for corporate board members; serving as a board member or director on a co-op, condo, or non-profit might expose you to legal action for claims such as breach of duty, selective enforcement, or failure to disclose conflicts of interest.

D&O insurance policies frequently exclude claims involving employment practices allegations (discrimination, wrongful termination, hiring practices, failure to promote) – A separate Employment Practices Liability (EPL) insurance policy can fill this gap.

A large percentage of claims brought against boards and individual members are often baseless and are dismissed. Even if a case is dismissed, legal defense costs are usually incurred, and they can be substantial. One of the most important aspects of a D&O Insurance policy is coverage for legal defense costs.