Directors and Officers Liability Insurance

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Directors and Officers Liability Insurance

Directors and Officers Liability Insurance

Directors and officers liability Insurance (commonly called D&O) is liability insurance payable to the managers and officials of a business, or to the organization(s) itself. It serves as indemnification (compensation) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful actions in their capacity as managers and officials. Such coverage can extend to defense costs arising from criminal and regulatory investigations/trials as well; in fact, frequently civil and criminal measures are brought against managers/officials concurrently. Deliberate actions that were prohibited, nevertheless, are generally not covered under D&O policies.


It is now closely linked with more extensive management liability insurance, which insures liabilities of the corporation along with the privacy obligations for the officials and managers of the company.


Directors and Officers Liability Insurance

Directors’ and officers’ liability insurance – also called D&O insurance – covers the cost of compensation claims made against a company’s directors and key managers (officials) for alleged wrongful actions. Such unlawful actions comprise of:


  • Negligence
  • Unlawful trading
  • Breach of duty
  • Breach of trust
  • Mistakes
  • Statements that are misleading
  • More…


Is D&O Liability Insurance Necessary?

In case, your business has key supervisors or directors, Directors, and Officers Liability Insurance can cover the expense of reimbursement claims made against them by stockholders, investors, workers, regulators or third parties.


Officers and directors have powers, obligations and unique responsibilities associated with their positions. All these usually are set out in their job description or terms of reference. In case a manager or official of a firm has been found guilty of acting against their powers, civil, criminal or regulatory proceeding may be brought against them.


Directors’ and officers’ liability insurance covers any settlement prices that originate from an unsuccessful defense, in addition to the expense of defending these proceedings.


If officials and managers would not have insurance, they face a larger risk of being unable to defend themselves against:


  • Civil proceeding that may result in awards and significant legal costs for damages.
  • Disqualification from holding the role of Manager.
  • Criminal prosecution which could lead to potential incarceration and fines.


What Does Directors and Officers Liability Insurance Cover?

Directors’ and officers’ liability covers claims that are created by:


  • Regulators e.g. investigations by the Health and Safety Executive (HSE) or the Office of Fair Trading stockholders or investors, e.g. for failure to act in the firm’s best interest
  • Lenders
  • Additionally, it covers claims brought in relation to:
  • Violation of European laws
  • Insolvency


Employment practices liability insurance can be purchased as an extension of officers’ and directors’ liability insurance. It covers worker discrimination claims, e.g. for unjust termination, harassment, or failure to encourage an employee maybe by promotion.


Directors’ and officers’ liability occasionally covers defense costs originating from regulatory and criminal investigations into your business where no real wrongful action continues to be alleged against a manager. Get in touch with your insurance company to determine what your policy covers.


What is Not Insured

Directors and officers liability insurance will not cover claims made in general against your organization, just those made against people for alleged wrongful actions performed within their capacity as officials or directors.




Joe Flynn is a Silicon Valley Entrepreneur who created Lavante, Inc. Lavante was started with the vision using Machine Learning, Natural Language Processing and advanced Data Extraction techniques to transform the traditionally manual-based Account Payable Recovery industry. Lavante Was acquired by PRGX Inc. in November 2017. Joe is currently working on a new venture using Artificial Intelligence and Machine learning to transform trade partner communications across the entire supply chain.