2090 Gause Blvd. W., Slidell, La 70460
Directors and Officers Liability Insurance
Directors and officers liability insurance (D&O insurance) protects against legal claims for wrongful acts performed by corporate directors or officers as part of their corporate duties. Wrongful acts include omissions, errors, misstatements, misleading statements, neglect or breach of duty. Beneficiaries are the directors, officers or the corporation itself.
Directors and officers can be personally sued by shareholders, creditors, employees, suppliers, customers, competitors or regulators. Suits can be bought for various reasons. Shareholders might sue for insider trading. Creditors might sue for misrepresenting the financial health of the company. Competitors might sue for anti-trust or unfair trade practices.
Being personally sued can be crippling for individual directors or officers. Just the risk of lawsuits might cause qualified individuals to refuse to take director or officer positions, or it could motivate existing officers or directors to act with excessive caution in pursuing a corporation’s interests. By insuring directors or officers against personal liability for their own wrongful acts, directors and officers insurance addresses these concerns.
Today, some policies are still purchased by individuals to cover themselves. These policies may be purchased by business people who sit on multiple boards. Also, lawyers or accountants serving as directors or officers may purchase professional indemnity D&O policies for themselves. This covers them for professional errors and omissions that their corporation’s policy general won’t cover. In some jurisdictions, corporations aren’t allowed to pay for D&O insurance, so a corporation will split the cost with its directors and officers to comply with the law.
D&O insurance policies cover claims made during the policy period. It doesn’t matter when the wrongful acts occurred. A claim arising from a lawsuit filed this year for a wrongful act committed last year is covered by this year’s policy.