Why Is Directors and Officers Insurance Important?
February 14, 2022
Corporate Directors and Officers Insurance (D&O) Protects Corporate Directors and Officers from Personal Liability
The majority of business insurance policies are meant to protect a company's assets and earnings. The goal of Directors and Executives Insurance, often known as D&O Insurance, is to protect and defend the personal assets and income of boards of directors, employees, and corporate officers.
A startup company does not require this type of insurance protection, but as your company expands and becomes more complex, as well as board members become wealthier, the necessity for D&O Insurance grows.
D&O Insurance isn't just for corporate board members; serving as a director on a co-op, condo, or non-profit board might expose you to personal liability for accidentally failing to declare conflicts of interest, breach of duty, or commingling personal and business funds and assets.
A D&O Insurance policy generally covers a lawsuit brought against a board of directors or an individual officer, and D&O Insurance coverage varies greatly. D&O insurance frequently excludes claims involving employment practices (hiring, firing, and promotion). An Employment Practices Liability (EPL) coverage may fill the gap where a D&O policy excludes employment-related claims.
A large percentage of claims brought against boards and individual members are 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.