What D&O covers
Directors and officers can be named personally in a claim, and their personal assets can be at risk. A D&O policy is usually built in three parts:
| Insuring agreement | What it does |
|---|---|
| Side A | Pays directors and officers directly when the organization cannot or will not indemnify them. |
| Side B | Reimburses the organization when it indemnifies its directors and officers. |
| Side C | Covers the organization itself for certain claims, depending on the wording. |
Wordings vary widely. Read the definition of a claim, who is an insured, and the exclusions before you compare quotes.
Where D&O claims come from
- Shareholders or investors alleging mismanagement or misrepresentation.
- Employees alleging wrongful dismissal, discrimination or harassment, where employment practices cover is included.
- Regulators investigating the organization or its leaders.
- Creditors after an insolvency.
- Competitors, customers and suppliers alleging unfair practices.
Common exclusions to check
- Fraud and deliberate criminal acts, once proven.
- Bodily injury and property damage, which belong on CGL.
- Professional services errors, which belong on E&O.
- Prior and pending litigation known before the policy started.
- Insured versus insured claims, with carve-backs that differ by wording.
Who should carry it
Private companies with outside investors or lenders, growing companies with employees, non-profits and charities with volunteer boards, and condominium corporations all face D&O exposure. Condo boards should also look at condo legal expense for the disputes D&O does not cover.
How Approved places D&O
D&O is placed file by file. An underwriter reviews the financials and the exposure, approaches the markets that fit, and comes back with terms or questions. There is no online D&O quote and no published limit table. Every quote is set by the market on the file.
