What is D & O Liability Insurance?
Directors and officers liability insurance provides protection for the directors and officers of your company from lawsuits based on the performance of their duties. Think of it as an errors and omissions insurance policy for management.
Directors and officers liability insurance is usually secured by a corporation as part of its commercial insurance package so that professionals can serve as supervisors of the organization without fear of personal financial loss. It is a type of professional liability insurance for a corporation’s management that is payable to the directors and officers of a company for losses or defense costs that result from legal action brought for alleged wrongful acts.
For example, if a director is found liable for financial losses, wrongful dismissal, employee discrimination or failure to remediate environmental damage, that director could be held personally liable. This is when it is important to have a D&O liability insurance policy in place.
Directors and officers coverage is very important for Not-for-Profits and Condo Boards
The truth is it is a good idea for every corporation with directors and officers to carry D&O liability insurance. But for non-profits and condo boards, where board members and officers are usually volunteering their time, it is vital. The last thing anyone wants is to find themselves in a position where someone who has donated their time and energy to an organization is personally financially ruined by something that happened while in service.
If you are considering accepting a position on a board for a not-for-profit or condo board, make sure you ask about their current D&O coverage as well as their claims history.
How much D&O liability insurance you need?
Just like commercial general liability insurance, D&O insurance coverage amounts are usually $1 million, $2 million or $5 million but coverage can go as high as $25 million. What coverage amount you need is usually dependent two things:
- The net worth of the directors
- The liability risk associated with the nature of operations
In the case of large corporations that want to attract high-net-worth investors and directors, the E&O coverage amount becomes part of making the company more attractive.
Whether public or private, large or small, profit or non-profit, every organization has some exposure to D&O suits. Make sure your organization is set up for success with the right insurance for your situation. Talk to one of our experienced commercial brokers about doing an insurance portfolio audit.
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Consider working with us to create a complete portfolio of insurance.
Getting to know you and your specific risk allows us to tailor make an insurance portfolio for you. Our clients meet with us yearly to ensure their insurance coverages are helping them achieve their strategic long-term goals.