What is D&O Insurance?

Directors and Officers Liability Insurance, often referred to as D&O Insurance, is liability insurance payable to directors and officers of the company, or the company itself, as reimbursement—indemnification—for loses or legal defense costs in the event wrongful acts are brought against a director or officer in their capacity as their respective office. Depending on the level of coverage selected, D&O Insurance can also over defense costs over criminal and regulatory trials and investigations: these criminal action are often brought simultaneously with civil wrongful acts actions.

What Companies Need Directors & Officers Insurance?

Not all companies need D&O Liability Insurance, but if you do meet the requirements and go uninsured you’re facing the double jeopardy of legal action against your directors and officers and having to pay out of pocket for legal defenses.

If you’ve got company stock, you’ve got shareholders. These investors normally elect a Board of Directors, who are in charge of overall management of the business. These directors in turn elect officers to run the day-to-day business of the company, and normally includes a Chief Operating Officer, Chief Executive Officer, or President, Vice President, Secretary, Treasurer, and a Chief Financial Officer, all of which are Officers.

So if you’re currently a public or private company with stocks, or you’re planning on becoming one of these companies soon, you’ll need to invest in D&O Liability Insurance.

Statistics About Directors & Officers Liability

According to the Towers Watson Directors and Officers Liability Survey, which tracks insurance patterns, including following patterns in purchasing, claims, and insurance needs.

• Across all industries, D&O liability claims related to regulatory trials and investigations increased by 23%.
• Company’s directors and officers are seeking additional assurances beyond basic corporate indemnifications: 43% desire adding additional protections to themselves in the event their company becomes insolvent or bankrupt.
• Between private, public, and nonprofit companies, 36% of all organizations reported to have increased the number of D&O claims in the past 10 years.

Why Your Business Needs D&O Insurance

Directors and officers insurance gives protection to directors and officers if they require legal defense, without the company having to pay for those costs. Depending on the type of coverage this can also compensate the company directly in the case it must indemnify directors and officers for their legal costs, or provide additional protections for both parties, including legal costs to reach agreements between all parties. D&O Insurance usually contains a segregate clause, which protects innocent D&Os when they are dragged into a legal battle due to the criminal actions of another.

If your company runs with a Board of Directors and elected officers—you should have D&O insurance, and if you’re planning on restructuring your company to this scheme—you should get this insurance lined up. Contact H&K Insurance about getting this vital insurance for your growing business, or changing your coverage for directors & officers insurance to another type.