What is Directors and Officers Insurance?
Directors and Officers (D&O) insurance is a type of liability insurance to protect the company’s executives against losses, defense costs, regulatory investigations, civil/criminal actions, etc. Executives of public, private, and non-profits may all be covered with this type of insurance. Directors and officers may be sued for various reasons – breach of fiduciary duty, misrepresentation, fraud, failure to comply with labor laws, theft, etc.
Reimbursements are made to the executives directly to help protect the executive’s personal assets. Varying degrees of executive responsibility are outlined in the corporations Articles of Association. D&O coverage may protect the executive against what is not indemnified by the corporation.
Types of D & O Coverage
There are three types of D & O coverage:
- A-sideIf the company can’t indemnify the directors/officers/employees, this type of coverage will cover the defenses costs, fees, or judgments (i.e. bankruptcy).
- B-sideWhen the corporation indemnifies the directors and officers, this type of coverage protects the corporation/organization.
- C-sideThis type of coverage protects the public corporation financially for securities claims against it. Entity coverage may protect smaller businesses.