The directors and officers of an organization have legal and moral obligations to their employees, clients, and shareholders. A suit may be brought against one, some or all of the officers and directors should there be a perceived or actual breach of these obligations. D&O insurance can mitigate the risk posed by litigation by covering the associated costs. A policy will pay the defense fees as well as any judgment or settlement. Below you will find everything you need to know about D&O insurance explained.
Who Is Covered?
Policies typically insure past, present and future directors of the organization. They also apply to non-executive directors and, often, those employees whose responsibilities are supervisory or managerial. D&O insurance is usually thought of in reference to for-profit companies, but it can also offer vital protection for the directors and officers of non-profits.
What Types of Claims Are Covered?
The most common type of D&O lawsuits are those alleging a perceived failure to exercise due care in decision-making. However, policies also provide coverage for many other kinds of claims, including:
- Conflict of interest
- Sexual harassment
- Discrimination based on sex, gender or race
- Misleading statements
When investing in D&O insurance, an insurance expert can provide valuable advice regarding the types of coverage needed in a particular field.
In conclusion, it is important to note that while these policies safeguard against a variety of different lawsuits, they do not apply to all types. For example, policies will not pay the defense costs of a criminal trial if the defendant is found guilty. Moreover, they may not cover cases where the defendant is found to have personally profited from wrongful acts.