Directors & Officers (D&O) Liability Insurance
Your Personal Assets Are at Risk
Plaintiffs regularly name individual directors and officers in lawsuits. Without D&O insurance, your home, savings, stock portfolios, and retirement funds could be at risk. Even groundless claims can drain millions in legal fees. According to industry data, average securities class action settlements exceed $26 million, and derivative settlements have exceeded $100 million.
Protect Your Leadership and Personal Assets
Essential coverage for directors, officers, and board members at companies of all sizes.
Every leadership role carries personal liability. When shareholders, regulators, or employees sue a company for mismanagement, they often name individual directors and officers personally. A common misconception is that lawsuits only target the company—in reality, executives' personal assets can be directly at stake.
D&O liability insurance provides a safeguard for company management, reimbursing settlements and legal defense costs from covered claims. For startups trying to attract board talent or raise capital, a strong D&O policy provides protection and signals maturity to investors. Many executives won't accept a board position without D&O coverage in place.
What Is D&O Liability Insurance?
Directors and Officers (D&O) liability insurance protects individuals serving in leadership positions and the organizations they serve from losses arising from lawsuits related to management decisions. It reimburses settlements and legal defense costs when directors or officers are sued for alleged wrongful acts in their corporate capacity.
D&O policies are written on a claims-made basis, meaning the policy must be in effect both when the alleged wrongful act occurred AND when the claim is filed. This makes maintaining continuous coverage critical.
The Three-Sided Coverage Structure
Side A — Personal Protection (Most Critical)
Protects individual directors and officers when the company cannot legally or financially indemnify them. This is critical during bankruptcy, when bylaws restrict indemnification, or for derivative lawsuits. Pays from the first dollar with no deductible. Shields personal assets including homes, savings, and stock portfolios.
Side B — Corporate Reimbursement
Reimburses the company when it pays legal fees or settlements on behalf of its directors and officers per indemnification obligations. Provides balance sheet protection and prevents costs from being financially crippling. Subject to a deductible.
Side C — Entity Coverage
Applies when the company itself is named in a claim. For public companies, typically limited to securities claims. For private companies, often applies broadly to claims arising from wrongful acts. Protects the corporate balance sheet.
What Claims Does D&O Insurance Cover?
Shareholder & Investor Lawsuits
Protection from claims alleging:
- ✓ Breach of fiduciary duty
- ✓ Mismanagement of company funds
- ✓ Misleading financial disclosures
- ✓ Securities fraud allegations
Securities class actions remain a significant risk for public companies
Derivative Actions
When shareholders sue directors on behalf of the company:
- ✓ Breach of duty of care
- ✓ Breach of duty of loyalty
- ✓ Self-dealing allegations
- ✓ Corporate waste claims
11 derivative settlements exceeded $100M since 2020
Regulatory Investigations
Defense costs for investigations by:
- ✓ SEC investigations
- ✓ State securities regulators
- ✓ FDA compliance inquiries
- ✓ Privacy and data protection agencies
Note: Fines and penalties typically not covered
Employment Practices Claims
Claims from current or former employees:
- ✓ Discrimination allegations
- ✓ Harassment claims
- ✓ Wrongful termination
- ✓ Breach of employment contract
Often requires separate EPL insurance for robust coverage
Additional Covered Claims
- • Bankruptcy-related fiduciary claims
- • M&A transaction disputes
- • Antitrust investigations
- • Intellectual property claims
- • Vendor and customer disputes
- • Creditor committee actions
Who Needs D&O Insurance?
Common Misconception: D&O is only for large publicly traded companies. In reality, companies of all sizes face D&O litigation risks. Smaller operations are often more vulnerable to financial devastation from litigation fees than larger companies.
Public Companies
Required to meet higher governance standards and complex securities regulations. Even the most compliant public companies face constant litigation risk. Directors and officers can be held personally liable for damages from wrongful decisions.
Private Companies
Exposure exists whether you're a fast-growing startup or legacy family business. Lawsuits come from employees, customers, creditors, vendors, competitors, and regulators—not just shareholders. Private companies face significant litigation risk from diverse sources.
Startups & Emerging Companies
Essential for attracting board talent—many executives won't serve without D&O coverage. Signals maturity to investors and potential board members. Critical for companies using crowdfunding or planning to go public. Enables covering litigation costs without diverting operational funds.
Nonprofit Organizations
All nonprofits need D&O protection regardless of size. Donors may sue if they feel donations weren't used properly. Government regulators may sue if the organization violated its charitable mission. Average monthly cost for nonprofits is just $67 ($600-$1,700 annually).
Is Your Leadership Adequately Protected?
Let us review your current coverage and ensure your directors, officers, and their personal assets are protected.
What D&O Insurance Does NOT Cover
Intentional Illegal Acts & Fraud
Criminal activities, deliberate fraud, intentional falsification, and insider trading are excluded. However, defense costs are generally provided until final adjudication confirms wrongdoing.
Bodily Injury & Property Damage
Physical injury and property damage claims require general liability insurance, not D&O coverage.
Insured vs. Insured Claims
If one director or officer sues another at the same company, D&O typically won't cover that dispute. This protects against collusion.
Personal Profit or Advantage
Claims arising from directors or officers allegedly gaining illegal personal profit are not covered.
Innocent Party Protection
Many policies include an "innocent" provision protecting directors and officers who were unaware of wrongful conduct. This ensures individuals not involved in or aware of misconduct remain covered even if others engaged in fraud.
How Much Does D&O Insurance Cost?
Average Annual Premiums
Premium Ranges by Organization Type
- Public companies: 0.25% to 5% of D&O limit
- Private companies: 0.05% to 3% of D&O limit
- Nonprofits: 0.03% to 2% of D&O limit ($600-$1,700/year)
Factors That Affect Cost
Company Size & Revenue
Larger companies with more stakeholders face greater risk of lawsuits and pay higher premiums.
Industry Type
Technology and biotech face higher premiums due to rapid changes and complex regulations. Manufacturing averages $596/month.
Claims History
Any past D&O claims significantly affect underwriters' views. Clean records qualify for better rates.
Financial Health
Insurers look for steady growth, effective debt management, and positive cash flow. Volatile finances increase premiums.
Related Management Liability Coverage
Employment Practices Liability (EPL)
Robust coverage for discrimination, harassment, and wrongful termination claims against the company.
Commercial Crime Insurance
Protection from employee theft, fraud, and embezzlement that can lead to management liability claims.
Professional Liability (E&O)
Coverage for claims arising from professional services errors and negligence.
Important Information
This information is provided for educational purposes only and does not constitute legal or insurance advice. D&O policies are complex documents with specific terms, conditions, and exclusions that vary by carrier.
D&O insurance is written on a claims-made basis. Maintaining continuous coverage and understanding retroactive dates is critical. Review policy wording carefully.
The Stan Steele Agency is licensed to conduct business in New York State. License information available upon request.
Protect Your Leadership Today
Don't let your directors and officers face personal liability unprotected. With settlements routinely reaching millions of dollars, D&O insurance is essential protection for business leadership.
Our D&O Expertise:
- ✓ Side A, B, and C coverage analysis
- ✓ Multiple carrier quotes for best rates
- ✓ Policy review for coverage gaps
- ✓ Claims assistance and advocacy
- ✓ Annual policy reviews
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