Directors and officers insurance provides protection for the directors and officers of a company if they are sued in conjunction with their duties. It covers legal costs, settlements, and judgements associated with lawsuits alleging wrongful acts, errors, misleading statements, and omissions.
What is Covered Under D&O Insurance?
- The D&O insurance offers coverage for the right to defend.
- In addition to the named directors and officers at the company, risk managers, company secretaries, and an employee who works in the supervisory or managerial capacity are covered under this policy.
Common D&O Risk Scenarios
Common D&O risk scenarios include breaches of fiduciary duties owed to the company and its shareholders, as well as charges related to neglect, error, wrongful trading, and misleading statements made by directors and officers.
A D&O insurance policy will not cover defense costs or settlements if the individual is found guilty of fraud, criminal activity, intentionally lying, providing inaccurate information, pending or prior litigation, bodily injury, or property damage.
Directors and Officers Liability Cover
When the organization is financially unable to indemnify its directors and officers against third party claims, D&O policy protects them individually. Some of the charges that are covered under this include lawsuit charges related to misrepresentation and misleading statements made by directors and officers, as well as legal charges relating to neglect, error, and wrongful trading.
In some states, corporations may be mandated to indemnify directors and officers to encourage people to take the positions. However, in certain cases, the corporation may be explicitly forbidden from indemnifying such a director or officer.