Directors & Officers Liability

In today’s uncertain business environment, the Directors and Officers of a company face an increasing risk of personal liability for any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, act or omission in the performance of their duties.

Today, your company must be diligent in its risk management efforts by implementing tight internal controls, procedures and disclosure policies in order to minimize risk. In addition to such protection, a Directors’ and Officers’ (D&O) Liability policy is an essential component of providing complete coverage for the exposures, needs, and concerns of your organization.

D&O coverage is specialized and complex, with various coverage options, terms and conditions that can vary widely from one policy and insurer to another, such as:

• Does the policy have severability of the application and exclusion?
• Does it provide "direct" entity coverage?
• Are employment practices violations covered?
• Does the company have a pension plan for its employees?

Directors and officers are under tremendous scrutiny. A Directors’ and Officers’ Liability policy may be the only thing standing between your company’s directors and their personal ruin in the event of a lawsuit.

Don’t leave anything to chance – HUB specialists have in depth knowledge of the market and will work with you to find the D&O coverage to best protect your organization and its leaders.

Contact a HUB Specialist today.

Who and what are covered by a D&O policy?

D&O provides protection to a company's directors, its officers, and usually the organization itself (publicly traded companies have securities protection only) for monetary judgments or settlements for negligence, or breach of duty of the directors and officers on behalf of the organization. The policy also indemnifies for legal expenses.

How does the policy work?

The first line of protection to directors and officers is a corporate indemnification agreement, typically found in the organization's charter or by-laws. The D&O policy indemnifies an organization for payments made to its directors or officers under an indemnification agreement. In the absence of an agreement, or if the organization can't fulfill its obligations, the policy will directly indemnify the directors and officers. Many policies also respond to claims made against the organization itself.

What is considered a claim?

The definition of a claim varies but often includes civil, criminal, judicial, administrative, regulatory, or arbitration proceedings and investigations.

Who is covered?

Covered persons generally include past, present, and future:

• Directors
• Officers
• Trustees
• Employees

What types of claims trigger coverage?

Common complaints include breach of fiduciary duty (such as using position to gain advantage as a supplier) or failure to exercise due care (agreement to payments or expenditures without sufficient investigation). Another common exposure for large employers is employment-related suits that allege harassment, discrimination, or wrongful termination.

What are typical exclusions?

The most common exclusions are those for bodily injury and/or property damage, pollution, violation of ERISA regulations, actions brought by one insured versus another, and failure to effect or maintain insurance. Many of these exposures can be addressed by a separate insurance policy.

"Conduct exclusions" are also typical, and may include exclusions for intentional, dishonest or fraudulent acts, the willful violation of a statute rule or law or criminal acts, or any gaining of personal profit or advantage that the director was not entitled.

Directors and Officers (D&O) liability is an intricate product, and the insurance needs vary for public, private, and not-for-profit companies. For expertise and market access, HUB is your source.

Contact a HUB Specialist today.