Director and Officer Insurance (D&O) Definition:
Director and officer insurance is a type of liability insurance covering director and officer for claims made against them while serving on a board of directors and/or as an officer. Director and officer insurance can be written to cover the director and officer of publicly traded companies, privately held firms, not-for-profit organizations, and educational institutions. In effect, the policies function as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences.
Director and Officer Insurance (D&O) policies can contain “shrinking limits” provisions, meaning that defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability (CGL) policies, in which defense are typically covered in addition to policy limits. However, some director and officer insurance products do provide defence costs in addition to the limit on an unlimited basis or could provide a special sublimit that is “in addition to the policy limit” that is specifically for defence costs.
Other distinctive features of director and officer insurance policies:
Whether your organization is publicly traded or a small private company director and officer insurance should be considered to help protect the management/leadership team. To learn more speak to an ALIGNED Insurance Broker or connect with us at www.alignedinsurance.com. See also Claims-made coverage trigger; Duty to defend; Errors and omissions (E&O) insurance; Nonprofit directors and officers liability insurance; Shrinking limits defense provision.
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