What is D&O Liability Insurance?

The Directors’ and Officers’ Liability coverage is an insurance that protects officers and trustees from being held accountable for the actions they took or failed to take as members of a board. It offers liability coverage for the damages that ensued alleged wrongdoings of a member.

This policy can cover the liability of officers and directors on an individual level, as well as the reimbursement of the whole company itself:

  • Side A Coverage: covers liabilities of individual officers and directions
  • Side B Coverage: also known as the Company Reimbursement Coverage, covers the damages to the company
  • Side C Coverage: or the Securities Entity Coverage, covers publicly traded companies in case there is an alleged wrongdoing in regards to the trading of its securities

What risks does the D&O policy cover?

The D&O policy provides financial help to board members when they are sued for an alleged wrongful act while performing their duties. It sustains the financial damages of the individuals as well as takes care of the legal defense for the covered officers and company. Additionally, many D&O coverages also sustain the costs that are a result of the proceedings in the course of investigations.

What risks are not covered by the D&O policy cover?

This policy does not fund willful wrongdoings or criminal acts. While guiltless members remain fully covered, if any of their associates were involved in a deliberate or intentional criminal act for personal benefit, the D&O will not support them.

Exclusions for D&O include:

  • Deliberate non-compliancy
  • Fraud
  • Illegal remuneration
  • Lawsuit pending from before the policy began

The insurance provides coverage on basis of the claims made, which means that it only covers insured individuals if the claims are made during the policy period – unless the policy holds a retroactive date.

Author: Andrew Bateman
Articles have been Reprinted with permission from Tri-Sure.

* These articles and related content on this website are provided without warranty of any kind and in no way constitute or provide legal advice. You are advised to contact an attorney specializing in Association Management for legal advice related to your specific issue and community. Some articles are provided by thrid parties and online services. Display of these articles does in no way endorse the products or services of Community Association Management by the author(s).