Directors & Officers (D&O) Liability Insurance and How Executives Can Protect Themselves
Directors and Officers (D&O) Liability Insurance, also known as management liability insurance, provides financial protection to directors and officers of a company in case someone sues them for alleged wrongful acts committed while performing their duties.
Having D&O Insurance helps executives protect themselves from potential legal liabilities and provide them with the peace of mind they need to perform their roles effectively.
What Does D&O Liability Insurance Cover?
The insurance covers legal expenses, settlements, and judgments resulting from claims of breach of fiduciary duty, negligence, mismanagement, errors and omissions, and other unintentional wrongful acts that the management team may commit.
The company can purchase D&O insurance on behalf of its directors and officers or by the individuals themselves. Though not legally required, it is considered essential for companies of all sizes. Directors and officers who do not have this plan might have to pay for losses out of their own pockets.
What Does The Policy Not Cover?
D&O insurance typically excludes coverage for deliberate, fraudulent, dishonest, or malicious acts by directors or officers.
D&O also does not cover bodily or personal injury or physical damage to third-party property. Typically, general liability covers these risks. Ensure your business has both insurances to have complete protection in case of a claim.
Who Does the Policy Cover?
The policy covers directors or officers, senior managers, supervisors, and outside directors.
What is Side A, Side B, and Side C in D&O?
Side A, Side B, and Side C are terms used in D&O insurance to describe the different types of coverage provided under a typical D&O insurance policy.
Side A coverage insures individual directors and officers against claims not indemnified or advanced by the company, such as when the company cannot pay for indemnification or has refused to do so. Such a situation may arise if the company has filed for bankruptcy.
Side A coverage is when the individual director or officer is the insured party, and their personal assets face risk.
Side B provides coverage to the company for claims made against its directors and officers when the company can indemnify them. It reimburses the company for any indemnification payments made to its directors and officers due to a claim or lawsuit.
Side B coverage is when the company is the insured party, and its corporate assets are at risk.
Side C coverage covers claims made against the company as an entity rather than against its directors and officers individually. It typically protects from claims related to securities laws violations or other corporate liabilities.
Like side B coverage, the company is the insured party in side C, and its corporate assets are at risk.
It is possible to adapt D&O insurance to tailor them to meet the unique needs and risks of different types of organizations. The best course of action would be to seek out an insurance provider with extensive expertise in the field to ensure appropriate coverage.
About Daniels Insurance, Inc.
At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.