Directors & Officers Liability
Directors and Officers Liability Insurance provides financial protection for the directors and officers of your company in the event they are sued in conjunction with the performance of their duties as they relate to the company. Think of Directors and Officers Insurance as a management Errors and Omissions policy.
Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits, and is where the majority of your exposure will be.
Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with performance failures and negligence with respect to your products and services, not the performance and duties of management. Generally it is a good idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
Most allegations involve decisions, acts, errors or omissions that have lowered stock values, compromised competitive industry position, wasted corporate assets, or overlooked significant growth or investment opportunities. These can result in financial injury to stockholders, employees, investors, and any other third party.
In the past, Directors & Officers were somewhat protected from liability due to the business judgment rule, particularly in the question of duty of care. That is, they acted in the best interest of the company and with due care, honest and reasonable belief, good faith and without a conflict of interest. Today, the judgment rule has lost much of its effect.
Special Note: This summary outlines in general terms the coverages afforded under some policies. Examine the policy carefully for any exclusions, limitations, or any other terms or conditions that may specifically affect coverage. The terms and conditions of the policy prevail.