What is Directors’ and Officers’ Liability Insurance?

Unlike a commercial general liability insurance (CGL) policy that provides coverage for claims arising from property damage and bodily injury, a directors’ and officers’ liability (D&O) policy specifically provides coverage for a “wrongful act,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.

A D&O policy provides defence costs and indemnity coverage to the entity listed on the policy, which may include the following:

• Coverage for individual directors and officers
• Reimbursement to the business for a contractual obligation to indemnify directors and officers who serve on the board
• Protection for the organization or entity itself

What Protections Does it Offer?

Typical Coverage Inclusions

• Entity coverage
• Payment priority for insured persons
• Severability of the insured as well as severability of the application
• Coverage over time—for past, present, and future directors and officers
• Pay on behalf clause

Note: A “fraud” exclusion is typically included in a D&O policy, which eliminates coverage for losses due to dishonest or fraudulent acts or omissions, or wilful violations of any statute, rule or law.

Did You Know?

Statistics show that shareholders and employees are the most likely group to sue private companies. Other parties may bring suits, such as the corporation itself, competitors, creditors, regulatory bodies, etc.